<PAGE> 1
VIST
SEMI-ANNUAL
[LOGO] REPORT
JUNE 30, 1998
FIRST
VARIABLE
LIFE INSURANCE COMPANY
<PAGE> 2
TABLE
OF [LOGO]
CONTENTS
Report of the President 1
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
Small Cap Growth 3
- --------------------------------------------------------------------------------
World Equity 5
- --------------------------------------------------------------------------------
Growth 7
- --------------------------------------------------------------------------------
Matrix Equity 9
- --------------------------------------------------------------------------------
Growth & Income 11
- --------------------------------------------------------------------------------
Multiple Strategies 13
- --------------------------------------------------------------------------------
High Income Bond 15
- --------------------------------------------------------------------------------
U.S. Government Bond 17
- --------------------------------------------------------------------------------
Schedule of Investments 19
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities 62
- --------------------------------------------------------------------------------
Statements of Operations 64
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets 66
- --------------------------------------------------------------------------------
Financial Highlights 70
- --------------------------------------------------------------------------------
Notes to the Financial Statements 78
- --------------------------------------------------------------------------------
Federated Prime Money Fund II F-1
- --------------------------------------------------------------------------------
<PAGE> 3
FIRST
VARIABLE
LIFE INSURANCE COMPANY
August, 1998
Dear First Variable Contract Holder:
I am pleased to present the semi-annual report for the Variable Investors Series
Trust (VIST) and the Federated Prime Money Fund II. These portfolios are the
investments within your First Variable contract.
The stock market continued to perform well in the first half of 1998, with the
S&P 500 Index returning 17.70%. While the S&P 500 Index is one of the most
popular measures of market performance, it contains mainly larger-sized
companies. Concerns over the Asian turmoil helped drive funds into the larger
company stocks, which tend to be perceived as less risky than other types of
stocks.
As a result of this and other factors, the stocks of smaller companies, such as
those held by our Small Cap Growth Portfolio, did not perform as well during the
first two quarters. This pattern of different performance between various types
of stocks is not unusual. Sometimes one type of stock will be up, while another
will lag. By diversifying your portfolio among the different types of
investments offered within your First Variable contract, you can help protect
your investments from volatility in any single market sector.
Long-term interest rates fell during the first half of 1998, strengthening the
returns of fixed income securities. The bond market, as measured by the Salomon
Broad Investment Grade Bond Index, returned 4.17% during the first half of 1998.
High yield bonds continued to perform well and returned 4.31%, as measured by
the First Boston High Yield Index.
While the larger stocks have continued to show good returns, please remember
that a well diversified portfolio can help you better weather any type of
market. Ask your investment professional for more information on First
Variable's asset allocation models, which can form the basis of a solid
strategy.
Thank you for your continued business. We appreciate the opportunity to help you
build your wealth, enjoy the benefits of your efforts, and preserve your assets
for future generations.
Sincerely,
/s/ John M. Soukup
John M. Soukup
President, Variable Investors Series Trust
<PAGE> 4
Small Cap Growth Portfolio
Objective
Seeks capital appreciation by investing primarily in common stocks of emerging
companies with the potential for significant capital appreciation and strong
earnings growth with attendant risk. The Portfolio normally invests at least 65%
of assets in common stocks and convertible securities issued by companies with
market capitalization or annual revenues not exceeding $1 billion at the time of
purchase.
Management's Discussion & Analysis
Year to date, we have seen two very different periods. After a solid surge into
the end of 1997, the start to 1998 was a tepid one. Lower oil prices and
accounting issues in healthcare led to weakness in energy and physician practice
stocks causing January to start slowly. Strong earnings results helped turn the
quarter into a good one. As stated above, however, the environment turned
decidedly negative in the second period for reasons described.
While the year has been difficult so far, we expect the compelling small cap
valuation to be a primary driver in the near term. By several measures, small
cap stocks are at relative lows seen rarely in the last 40 years. In addition,
growth estimates for the S&P 500 are declining as economic growth is expected to
moderate while small cap growth expectations stocks continue strong. When
coupled with superior fundamentals, we feel investors will find it hard to
ignore the small cap arena.
The second quarter was impacted by the issues that have weighed heavily on
investors' minds in recent periods. The Asian crisis reemerged and fears of
inflation and higher interest rates continue to influence the financial
markets. Small cap stocks were especially hurt by these factors. Investor
preference for large, liquid investments also cast a pall on small cap
stocks.
With an anemic April and poor May, another strong first quarter earnings period
was essentially overlooked in the face of these macroeconomics factors.
Fortunately, by the end of June, investors brightened at the prospects for the
second quarter.
Pilgrim Baxter &
Associates, Ltd.
Pilgrim Baxter & Associates, Ltd.
-----------------------
INVESTMENT COUNSEL
small
cap growth
Performance
<TABLE>
<CAPTION>
------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
------------------------------------------------
<S> <C>
Year to Date (0.08)%
------------------------------------------------
1 Year 0.91%
------------------------------------------------
5 Year N/A
------------------------------------------------
Since Inception 17.59%*
*May 4, 1995
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
-------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
-------------------------------------------------------------
<S> <C> <C>
Computer Task Group Inc. 3.05% 12.36%
-------------------------------------------------------------
Eastern Environmental Svcs 2.77% 11.23%
-------------------------------------------------------------
American Disp Svcs Inc. 2.72% 11.01%
-------------------------------------------------------------
Waters Corp. 2.63% 10.65%
-------------------------------------------------------------
Computer Horizons Corp. 2.34% 9.47%
-------------------------------------------------------------
Applied Graphics Technologies 2.33% 9.44%
-------------------------------------------------------------
Technology Solutions Co. 2.31% 9.36%
-------------------------------------------------------------
National Surgery Ctrs Inc. 2.22% 9.00%
-------------------------------------------------------------
Metamor Worldwide Inc. 2.16% 8.76%
-------------------------------------------------------------
Amresco Inc. 2.15% 8.72%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
---------------------------------------------------------
% of
As of 6/30/98 Portfolio
---------------------------------------------------------
<S> <C>
Systems Integrator 10.7%
---------------------------------------------------------
Environmental 7.3%
---------------------------------------------------------
Commercial Services 5.2%
---------------------------------------------------------
Special Outpatient Facilities 4.0%
---------------------------------------------------------
Semiconductors 3.9%
</TABLE>
Special risks due to small size such as limited markets and financial resources
should be considered when investing in small cap stocks.
3
<PAGE> 5
Management's Discussion & Analysis (Continued)
In anticipation of the period, the structure of our portfolio has changed
somewhat. The impact of Asia on technology has lead to the sale of a number of
stocks with significant exposure to that region. As such, the funds have been
reinvested in companies more focused on domestic activities especially in the
service sector. While we do not make specific sector decisions, it is the
fundamentals of several companies in various subgroups of this sector that has
lead to an increased weighting in this area.
Consumer stocks posted positive returns in the quarter for the Small Cap Growth
Portfolio's Benchmark, the Russell 2000 Index. The Portfolio's general
underweighting relative to the Index and its heavier exposure to the lodging
subgroup caused this portion of the Portfolio to underperform. Also, holdings of
telecom equipment stocks were dramatically impacted by their concentrated
customer bases and foreign sales exposure causing negative relative results.
OUTLOOK
The current market environment is quite negative. Concerns over Asia and the
potential impact of wage inflation in the U.S. have cast a pall over the general
equity market. Technical indicators have also turned negative. When coupled with
a potential slowing in the economy, it becomes difficult to muster the courage
to invest. However, it is environments such as this that often create
significant opportunity for smaller stocks. When compared to larger stocks'
valuations and expectations, small cap stocks remain very attractive. A number
of studies illustrate that the opportunity for small cap outperformance from
current relative valuation levels is quiet high. As such, we fell that small cap
stocks are increasingly compelling. Further support can be found in second
quarter earnings results which indicate continued superior fundamental results
for small cap stocks. While the path to superior performance may not be smooth,
the earnings roadbed is solid. It is this base which we feel will lead to
improved performance.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP GROWTH
PORTFOLIO AND THE RUSSELL 2000 INDEX*
[LINE CHART]
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Life of
Year Portfolio***
---- ------------
<S> <C> <C>
Small Cap Growth Portfolio 0.91% 17.59%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Small Cap Growth
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
*** From commencement of operations (May 4, 1995)
4
<PAGE> 6
World Equity Portfolio Keystone
Investment
[LOGO]
Objective
The investment objective of the World Equity Portfolio is to seek maximum
long-term total return by investing primarily in common stocks, and securities
convertible into common stocks, traded in securities markets located around the
world, including the United States. This objective per First Variable's
instruction, is to be obtained via international "blue chips" and domestic U.S.
small cap stocks.
Management's Discussion & Analysis
INTERNATIONAL COMMENTARY
The first half of 1998 has seen very strong stock performance in the European
equity markets while the rest of the international equity universe have been
volatile and disappointing from a total return standpoint. Currently, twelve
developed foreign markets have U.S. dollar returns that exceed the +17.70%
return that investors have received from the S&P 500. All twelve of those
markets are European. European economies and markets continue to benefit from
low inflation, low relative interest rates, slow but improving growth, strong
bond markets, cost cutting, and corporate restructuring as the continent moves
toward the European Monetary Union in 1999. We currently have 51.3% of the
portfolio invested in Europe. The largest country weights in Europe and the
United Kingdom (17.8%), Switzerland (8.9%), and France (7.6%). We continue to be
the most optimistic about Europe.
Keys to performance have been our allocation in Europe and the performance of
our food, banking, pharmaceutical, publishing, and insurance stocks in this
market, and our ability to avoid the trouble spots in Japan, Asia, and Latin
America.
Currently, we have approximately 4.2% in Japan. We are monitoring Japan as their
financial system is restructured and the government attempts to improve their
domestic economy. We believe it will take Asia a long time to work through their
problems.
Additionally, the Portfolio has approximately 4% in the markets of Australia and
Canada. These markets were negatively impacted by the volatility
world
equity
Performance
<TABLE>
<CAPTION>
----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
----------------------------------------------
<S> <C>
Year to Date 15.98%
----------------------------------------------
1 Year 15.58%
----------------------------------------------
5 Year 15.86%
----------------------------------------------
10 Year 9.62%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
---------------------------------------------------------------
% OF % OF
HOLDINGS PORTFOLIO TOP 10
---------------------------------------------------------------
<S> <C> <C>
Federal Farm Cr Bk Cons Dsc Nt 4.71% 19.11%
---------------------------------------------------------------
Nestle SA 4.02% 16.32%
---------------------------------------------------------------
Astra AB 2.51% 10.18%
---------------------------------------------------------------
AXA UAP 2.24% 9.09%
---------------------------------------------------------------
Karstadt AG 2.14% 8.69%
---------------------------------------------------------------
Novartis AG 1.98% 8.03%
---------------------------------------------------------------
Vodafone Group 1.95% 7.92%
---------------------------------------------------------------
Skand Enskilda SKN 1.79% 7.26%
---------------------------------------------------------------
London Intl Group 1.66% 6.76%
---------------------------------------------------------------
Diageo plc 1.64% 6.64%
</TABLE>
Top 5 Countries
<TABLE>
<CAPTION>
----------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
----------------------------------------------------------
<S> <C>
United States 35.2%
----------------------------------------------------------
United Kingdom 17.8%
----------------------------------------------------------
Switzerland 8.9%
----------------------------------------------------------
France 7.6%
----------------------------------------------------------
Sweden 7.0%
</TABLE>
Special risks such as currency fluctuations and political changes should be
considered when investing internationally.
5
<PAGE> 7
Management's Discussion & Analysis (Continued)
surrounding the Asian economies and markets that resurfaced in the second
quarter. However, our positions in these markets are primarily focused in the
financial and banking sectors of Canada and Australia. They performed relatively
well during this period of uncertainty as their domestic interest rates continue
to stay at relatively low levels, the prospects increase for possible
consolidation in these sectors, and the trend for bank managed 401k-like
investment programs continues to gain momentum.
The Portfolio benefited from our use of currency forwards to hedge against an
appreciating U.S. dollar. The U.S. dollar has strengthened versus the European
and Japanese currency year-to-date. Currently, the portfolio is 67% U.S. dollar
exposed. This figure takes into consideration our forward currency hedges, and
those countries whose currencies are linked to the U.S. dollar. Currencies that
we have partially hedged include the Australian dollar, Japanese yen, German
mark, Swiss franc, Dutch guilder, French franc, Swedish krona, and Spanish
peseta. On average these currencies declined - 3.2% versus the U.S. dollar
during the first half of the year. Currently 62% of the portfolio is invested in
international equities.
DOMESTIC COMMENTARY
The U.S. portion of the portfolio experienced a volatile quarter. The Russell
2000 Small Cap Index continued the strength of the first quarter until mid April
and then quickly declined 12%. The net result was a decline of 5% for the
quarter. The portfolio performed at a slightly better level. Strength came from
several areas of high technology. Such as stocks as Lycos, in internet services,
Exodus in network communications, Antec in Cable TV set top boxes, and Computer
Leaning Centers in education all provided gains of 40% or more during the
quarter. Overall results were tempered by weakness in energy related stocks. The
consensus outlook has been one of greater concern for Asian economies to slow
earnings growth in the U.S. We feel that there are several areas for small cap
investment where this is not a concern. Small U.S. stocks are reaching very
attractive valuations. The long-term outlook remains positive. Currently, 35% of
the portfolio is invested in domestic small-cap stocks.
PERFORMANCE
The year-to-date performance of the World Equity Portfolio is 15.9%. The MSCI
World Index is 16.9%. For the second quarter the Fund was .97% versus 2.1% for
the index.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE WORLD EQUITY
PORTFOLIO AND THE MSCIWORLD INDEX*
[LINE CHART]
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
World Equity Portfolio 15.58% 15.86% 9.62%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the World Equity
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but do not include any insurance charges imposed
in connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
6
<PAGE> 8
Growth Portfolio Value Line, Inc.
[LOGO]
Objective
Seeks capital growth by investing primarily in common stocks and securities
convertible into common stock. Also seeks current income when consistent with
the primary objective. Securities are selected on the basis of their issuers'
long-term potential for expanding their earnings, profitability, and size and on
the basis of potential increases in market recognition of their securities.
Management's Discussion & Analysis
The stock market posted strong returns in the first half of 1998, with the S&P
500 up 17.7%. Despite grave concerns about the impact of Southeast Asian
currency devaluations on the U.S. economy at the end of 1997, a favorable
economic environment prevailed. This was characterized by stronger-than
anticipated and likely unsustainably-high GDP growth in the first quarter and
moderate inflation. Long-term interest rates dropped significantly, from 5.9% at
the end of March to 5.6% at the end of June. The S&P 500 rebounded sharply in
the first quarter, up 14.0%. However, fears about the Pac Rim and Japan, in
particular, resurfaced in the second quarter. The market focus was clearly
liquidity oriented, with money flowing into large-cap stocks to the detriment of
their small-cap brethren. In the June quarter, the S&P 500 return of 3.3% w as
significantly lower than that of the first quarter. Given the deflationary
implications of the situation in Southeast Asia and the lack of significant
evidence of runaway inflation, the Federal Reserve Board did not raise
short-term interest rates. We do not foresee any change in monetary policy as
the second half of the year unfolds.
First-quarter GDP growth of 5.4% was rather robust, and will probably decelerate
over the remainder of the year, to a range of 2.0-2.5%. This reflects the impact
of the General Motors strike, the strength of the dollar, the weakness in
Southeast Asia, and the likelihood that the inventory overhang from the first
quarter will be worked down. We expect inflation to remain moderate, with both
the CPI and PPI in the 1%-2% range. The weakness in the Pac Rim economies will
likely have an impact on U.S. corporate profit growth.
growth
Performance
<TABLE>
<CAPTION>
---------------------------------------------
Average Annual Total Return As Of 6/30/98
---------------------------------------------
<S> <C>
Year to Date 14.37%
---------------------------------------------
1 Year 25.68%
---------------------------------------------
5 Year 20.39%
---------------------------------------------
10 Year 15.62%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
--------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
--------------------------------------------------------------
<S> <C> <C>
Cisco Systems Inc. 3.61% 12.50%
--------------------------------------------------------------
BMC Software Inc. 3.51% 12.12%
--------------------------------------------------------------
Pfizer Inc. 3.22% 11.13%
--------------------------------------------------------------
Omnicom Group 3.21% 11.10%
--------------------------------------------------------------
Travelers Group Inc. 3.02% 10.45%
--------------------------------------------------------------
Schering Plough Corp. 2.80% 9.67%
--------------------------------------------------------------
E M C Corp. Mass 2.52% 8.73%
--------------------------------------------------------------
Tellabs Inc. 2.50% 8.64%
--------------------------------------------------------------
American Intl. Group Inc. 2.32% 8.02%
--------------------------------------------------------------
AES Corp. 2.21% 7.65%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
--------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
--------------------------------------------------------
<S> <C>
Computer Software 13.6%
--------------------------------------------------------
Drugs 11.0%
--------------------------------------------------------
Computer Related 8.1%
--------------------------------------------------------
Banks 7.7%
--------------------------------------------------------
Insurance 7.7%
</TABLE>
7
<PAGE> 9
Management's Discussion & Analysis (Continued)
PERFORMANCE
The Growth Portfolio had a total return (including dividends and income) for the
second quarter of 1998 of 4.39% as compare to 3.30% for the Standard & Poor's
500 Index. Stock selection is guided by the Value Line Timeliness Ranking
System, which focuses on stocks with superior earnings growth and price
momentum. In the second quarter, the Portfolio benefited from strong performance
in the retail sector, finance, and technology, but was hurt by holdings in
energy, transportation and housing.
OUTLOOK
We believe that the U.S. economy, with moderating GDP growth, benign inflation
and relatively stable interest rates, provides a favorable backdrop for the
equity market. However, given the strong performance of the market through the
first half, we remain somewhat cautious over the remainder of the year. Although
the market shrugged off the implications of the Southeast Asian currency
devaluations in the first quarter, there are still risks associated with this
part of the world. And the very significant problems in the Japanese economy
represent yet another unknown. Second-quarter earnings reports should begin to
provide some insight on these issues. Nonetheless, our investment discipline
leads us to companies that continue to exhibit attractive growth rates within a
broad array of industry sectors, which should position the portfolio well going
forward. Our largest sector weightings are technology, finance, healthcare and
consumer cyclicals.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GROWTH PORTFOLIO
AND THE S&P 500 INDEX *
[LINE CHART]
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
Growth Portfolio 25.68% 20.39% 15.62%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Growth Portfolio and
the return on the investment both will fluctuate and redemption proceeds may be
higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
8
<PAGE> 10
Matrix Equity Portfolio State Street
Global Advisors
[LOGO]
Objective
Seeks capital appreciation and current income by investing in a diversified
portfolio of equity securities that is selected on the basis of a proprietary
analytical model.
Management's Discussion & Analysis
U.S. equity market returns were dampened from the swift pace earlier in 1998, as
demonstrated by the 3.3% return for the S&P 500 Index over the second quarter.
While this return seems weak by recent standards, the market shrugged off a
mini-correction and continuing Asian economic turmoil, and has pushed the
large-cap U.S. stock indices back to new records. This Index return equates to
an annual return of nearly 14%, strong on an historical absolute basis. With
many economies virtually collapsing around the pacific rim, U.S. corporate
profits slowing, and signs of decelerating economic growth around the world, the
resilience of the U.S. stock market continues to surprise most investors.
Additionally, the consumer-led front end of the economy continues to be strong.
Despite slower earnings for companies in the S&P 500 over the second quarter,
S&P 500 dividends continued to accelerate. While cyclicals such as capital goods
(-2.1%) and basic materials (-3.8%) lagged the Index returns for the quarter,
technology (+9.6%), health care (+6.5%), financials (+4.7%), and utilities
(+3.7%) lead Index returns. On an individual stock basis, the largest of the
best known blue chips continue to carry returns for the S&P 500. Investors
seeking out the largest and best-know n names and increased risk-aversion as the
economy begins to slow, may be reasons for the continued strength among the
largest of the large caps.
PERFORMANCE
In this dampened equity environment, the Matrix Equity Portfolio returned 14.96%
for the first half of 1998. At the sector level, the Portfolio was overweight
relative to the Index in technology, consumer cyclicals, and capital goods. We
held slight overweight positions in health care and communication services. We
held significant underweight S&P 500 benchmark-relative positions in consumer
staples, while we were slightly underweight the benchmark in basic materials,
energy, transportation and utilities. On the good news front, the Portfolio was
helped by our technology weighting in tech manufacturing, and
matrix
equity
Performance
<TABLE>
<CAPTION>
--------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
--------------------------------------------
<S> <C>
Year to Date 14.96%
--------------------------------------------
1 Year 28.28%
--------------------------------------------
5 Year 15.43%
--------------------------------------------
10 Year 14.42%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
-------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
-------------------------------------------------------------
<S> <C> <C>
Microsoft Corp. 3.30% 14.24%
-------------------------------------------------------------
Dreyfus Cash Mgmt Plus 2.95% 12.72%
-------------------------------------------------------------
General Electric Co. 2.72% 11.75%
-------------------------------------------------------------
Lucent Technologies Inc. 2.40% 10.36%
-------------------------------------------------------------
NationsBank Corp. 2.09% 9.01%
-------------------------------------------------------------
Chase Manhattan Corp. 2.06% 8.89%
-------------------------------------------------------------
Pfizer Inc. 2.05% 8.86%
-------------------------------------------------------------
Exxon Corp. 1.98% 8.56%
-------------------------------------------------------------
Morgan Stanley Dean Witter 1.82% 7.86%
-------------------------------------------------------------
Coca Cola Co. 1.80% 7.75%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
--------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
--------------------------------------------------------
<S> <C>
Drugs 8.1%
--------------------------------------------------------
Banks 7.8%
--------------------------------------------------------
Telecommunications 7.0%
--------------------------------------------------------
Software 5.1%
--------------------------------------------------------
Food & Beverages 4.5%
</TABLE>
9
<PAGE> 11
Management's Discussion & Analysis (Continued)
our sector exposure to financials, the brokerage firms in particular. On the bad
news front, the Portfolio was hurt relative to the benchmark in communication
services, the telephones specifically. The Portfolio was also hindered due to
stock selection in defense/aerospace and industrial services.
Our investment process emphasizes quantitative modeling, which implements an
integrated growth and value bottom-up stock selection method designed to
outperform the Index over the long-term. While risk controls are used in
portfolio construction, we will take active bets away from the benchmark in
those industries where we see fair valuations and strong long-term growth
prospects. Because value is an integral component of the investment process, the
Portfolio will not be overweighted in excessively expensive stocks. Our
disciplined approach hurt Portfolio returns in industries where price momentum
continues in unhesitating fashion.
RESEARCH UPDATE: INDUSTRY CLUSTER ANALYSIS
The U.S. Active Equity team is always searching for ways to improve the
return/risk profile of our strategies. There are two ways to accomplish this:
generate more excess return or enhance risk controls without compromising excess
return.
Within our Value Model, we assess companies on an industry relative basis in
order to identify the best and worst companies within a particular industry. Our
approach is more effective in industries with greater numbers of companies
because, in general, there is more of a difference between the "best" and
"worst" companies within that industry. Recognizing this issue led us to the
concept of "industry clusters."
Initially, we believed that if we grouped industries exhibiting similar
characteristics together, our differentiation power would improve our
proprietary model's stock ranking process. The first step in the process of
testing this hypothesis involved determining the industry clusters. SSgA's
Advanced Research Center assisted with the initial review. We performed returns
based statistical analysis including a price-to-book factor that resulted in 30
industry clusters.
Overall the preliminary review resulted in intuitively logical groupings: there
were also some unusual results such as a cluster of Retail Food, Apparel and
Publishing. The U.S. Active Equity Team reviewed the cluster groups to make sure
the industries within the cluster were driven by the same macroeconomic factors.
For example, Railroads, Freight, Airlines and Trucking were grouped together
because they are influenced by commerce and fuel prices. Ultimately, 24 industry
clusters were agreed on from both a statistical and intuitive perspective.
Backtesting was the next step toward implementation of the industry clusters. We
looked at our base case versus simulations using conservative transaction costs.
We also monitored turnover to insure that in "real life," the strategy would not
experience a change in the level of portfolio turnover.
The results were favorable using 24 industry clusters instead of the 53 BARRA
industries improves the power of our Value Model and improves portfolio returns
with a modest increase in overall portfolio risk. We plan to implement this
enhancement later this July. April 1, 1994 results were achieved by different
portfolio managers.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MATRIX EQUITY
PORTFOLIO, THE S&P UTILITY INDEX* AND SINCE MAY 1, 1997 THE S&P 500 INDEX*
[LINE CHART]
* These Indices are unmanaged indices in which investors cannot invest. Results
for the Indices do not reflect the expenses and investment management fees
incurred by the Portfolio. Past performance is not predictive of future
performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
Matrix Equity Portfolio 28.28% 15.43% 14.42%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Matrix Equity
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but do not include any insurance charges imposed
in connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
10
<PAGE> 12
Growth & Income Portfolio Warburg Pincus Asset Management, Inc.
[LOGO]
Objective
Seeks long-term growth of capital and income and a reasonable current return by
investing primarily in dividend-paying common stocks, convertibles, and readily
marketable securities that derive their value from common stocks, as well as
fixed income securities. The Portfolio does not strive to maintain a specific
balance of stocks, bonds, and money market instruments. Instead the manager
selects the industry sectors and individual securities he believes have the
highest potential for attractive total returns.
Management's Discussion & Analysis
The U.S. stock market as a whole had strong performance over the
January-through-June period. Asia-related earnings uncertainties
notwithstanding, investor sentiment toward equities remained favorable through
the period, supported by a continued healthy economy and subdued inflation. The
Portfolio benefited from this positive sentiment, and from strong showings from
its financial, telecommunications and aerospace holdings in particular. Stocks
that hampered the Portfolio's return included its energy and tobacco-related
holdings, which lagged the broader market during the period.
PERFORMANCE
For the six months ended June 30, 1998, the Portfolio had a gain of 12.71% vs.
gains of 17.70% for the S&P 500 Index* and 12.11% for the Lipper Growth & Income
Funds Index.**
PORTFOLIO CHANGES
We made few noteworthy changes to the Portfolio's industry exposure during the
first six months of 1998. It remained broadly diversified by sector, finding
little incentive, from a relative-valuation perspective, to heavily overweight
specific areas. That said, we continued to select stocks strictly on a bottom-up
basis, emphasizing companies with good cash-flow generation and potential for
significant earnings growth.
The Portfolio's noteworthy areas of concentration included the financial
services industry, a weighting which was increased over the course of the
period. We identified several attractive buying opportunities here during the
first six months, holding a mix of insurance, asset-management and
mortgage-services companies. Elsewhere in the financial industry, we maintained
a limited exposure to banking stocks, since we viewed most as expensive. That
said, we found several issues that we deemed
growth &
income
Performance
<TABLE>
<CAPTION>
--------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
--------------------------------------------
<S> <C>
Year to Date 12.71%
--------------------------------------------
1 Year 25.43%
--------------------------------------------
5 Year N/A
--------------------------------------------
Since Inception 21.69%*
</TABLE>
*May 31, 1995
Top 10 Holdings
<TABLE>
<CAPTION>
------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
------------------------------------------------------------
<S> <C> <C>
PMI Group Inc. Chrysler Corp. 2.86% 13.04%
------------------------------------------------------------
British Petroleum plc 2.68% 12.24%
------------------------------------------------------------
Citicorp 2.28% 10.40%
------------------------------------------------------------
Federated Department Stores Inc 2.21% 10.06%
------------------------------------------------------------
Compaq Computer Corp. 2.08% 9.48%
------------------------------------------------------------
Chrysler Corp. 2.07% 9.46%
------------------------------------------------------------
Raytheon Co. 2.02% 9.22%
------------------------------------------------------------
Intl Business Machines 2.00% 9.14%
------------------------------------------------------------
Merck & Co. Inc. 1.96% 8.94%
------------------------------------------------------------
Polaroid Corp. 1.76% 8.04%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
--------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
--------------------------------------------------------
<S> <C>
Financial Services 9.8%
--------------------------------------------------------
Telecommunications 6.9%
--------------------------------------------------------
Aerospace & Defense 6.6%
--------------------------------------------------------
Health Care 5.3%
--------------------------------------------------------
Retail Trade 5.3%
</TABLE>
11
<PAGE> 13
Management's Discussion & Analysis (Continued)
to be attractively priced, including First Chicago NBD, which we purchased in
the wake of its announced merger with Banc One Corp. In our view, the synergies
created by the merger are significant and should support the stock's long-term
performance.
We also maintained a modestly overweighted position in the energy sector, with
the focus here remaining on efficiently managed oil exploration and production
companies with expanding capacity profiles, which we believe have good
longer-term prospects. One name added was Occidental Petroleum, a stock found
attractive for its significant dividend yield and, given the company's recent
restructuring announcements, long-term appreciation potential.
Within the health-care sector, we continued to emphasize managed-care companies
with good enrollment growth and a firm hand on costs. One stock added was United
Healthcare, an HMO whose longer-term prospects we view favorably due in part to
the company's recent strategic acquisitions.
The Portfolio also continued to have a sizable exposure to consumer-type stocks,
including a significant weighting in the consumer durables sector where one of
the Portfolio's largest position throughout the period was Chrysler. In other
consumer-related areas, we continued to have a significant weighting in the
retail sector. We made a few adjustments here during the first six months of
1998, most notably establishing a position in Sears Roebuck and reducing then
eliminating the position in Wal-Mart, on profit-taking.
The balance of the Portfolio remained invested across a broad range of
industries, including technology, where we generally found the best
risk-adjusted growth prospects in the computer sector.
OUTLOOK
Looking ahead to the next several months, we believe the stock market will
continue to be characterized by generally lofty equity valuations and
considerable volatility. Set within this environment, we continue to place a
premium on risk management for the portfolio as a whole. As a result, individual
stock selection remains critical, and we will continue to hold only those stocks
we deems have the best longer-term risk-adjusted performance potential.
** The Lipper Growth & Income Funds Index is an equal-weighted performance
index, adjusted for capital-gains distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by Lipper
Analytical Services Inc.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GROWTH & INCOME
PORTFOLIO AND THE S&P 500 INDEX*
[LINE CHART]
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Life of
Year Portfolio***
---- ------------
<S> <C> <C>
Growth & Income Portfolio 25.43% 21.69%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Growth & Income
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
*** From commencement of operations (May 31, 1995)
12
<PAGE> 14
Multiple Strategies Portfolio Value Line, Inc.
[LOGO]
Objective
Seeks as high a level of total return over an extended period of time as is
consistent with prudent investment risk by investing in equity securities, bonds
and money market instruments in varying proportions, depending upon prevailing
economic and financial market conditions.
Management's Discussion & Analysis
The Portfolio had a total return of 4.14% for the quarter, compared to 3.03% for
a 60% S&P 500/40% Lehman Government Corporate Bond Index composite. On June 30,
1998, the Portfolio was 77.3% invested in common stocks, 18.8% in bonds with a
mixture of high grade corporates, government, and government agencies, and
approximately 3.9% in short-term securities. No changes in the asset class
weightings have been made since the first quarter. The overweighting in equities
vis-a-vis the benchmark contributed to the outperformance. The equity portion of
the portfolio was up 4.91%, outpacing the S&P 500 return of 3.30%. The fixed
income portion of the portfolio benefited from the rally in the bond market and
gained 2.66%, modestly beating the Lehman Government Corporate Bond Index return
of 2.62%.
The equity holdings in the Portfolio mirror those of the Growth Portfolio and
will continue to do so. Selection is guided by the Value Line Timeliness Ranking
System, which favorably ranks stocks with earnings and price momentum. Our
heaviest section weightings are in technology, finance, healthcare and consumer
cyclicals, sectors that are relatively more attractive in terms of
above-trendline growth patterns.
multiple
strategies
Performance
<TABLE>
<CAPTION>
--------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
--------------------------------------------
<S> <C>
Year to Date 11.64%
--------------------------------------------
1 Year 23.30%
--------------------------------------------
5 Year 16.67%
--------------------------------------------
10 Year 13.89%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
-------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
-------------------------------------------------------------
<S> <C> <C>
United States Treasury Nts 3.98% 13.72%
-------------------------------------------------------------
FHA 3.96% 13.62%
-------------------------------------------------------------
United States Treasury Bds 3.12% 10.74%
-------------------------------------------------------------
BMC Software Inc. 2.86% 9.86%
-------------------------------------------------------------
United States Treasury Nts 2.82% 9.72%
-------------------------------------------------------------
Pfizer Inc. 2.67% 9.19%
-------------------------------------------------------------
Microsoft Corp. 2.53% 8.71%
-------------------------------------------------------------
Cisco Sys. Inc. 2.52% 8.67%
-------------------------------------------------------------
Travelers Group Inc. 2.30% 7.93%
-------------------------------------------------------------
Omnicom Group 2.28% 7.83%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
------------------------------------------------------
<S> <C>
U.S. Government Securities 12.6%
------------------------------------------------------
Computer Software 10.2%
------------------------------------------------------
Drugs 8.7%
------------------------------------------------------
Insurance 6.2%
------------------------------------------------------
Banks 6.0%
</TABLE>
13
<PAGE> 15
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MULTIPLE STRATEGIES
PORTFOLIO, THE S&P 500 INDEX* AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX*
[LINE CHART]
* These Indices are unmanaged indices in which investors cannot invest. Results
for the Indices do not reflect the expenses and investment management fees
incurred by the Portfolio. Past performance is not predictive of future
performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
Multiple Strategies Portfolio 23.30% 16.67% 13.89%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Multiple Strategies
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
fund operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
14
<PAGE> 16
High Income Bond Portfolio Federated Investment
Counseling, Inc.
[LOGO]
Objective
Seeks a high level of current income while secondarily seeking capital
appreciation by investing primarily in fixed-income securities, including
corporate bonds and notes, discount bonds, zero-coupon bonds, convertible
securities, and preferred stocks and bonds issued with warrants, which are rated
Baa or below by Moody's or BBB or below by Standard & Poor's or in unrated
securities determined to be of comparable quality.
Management's Discussion & Analysis
Two opposing factors impacted the high yield market during the six months ended
June 30, 1998. On the positive side, the domestic economy continued to generate
strong growth. On the negative side, Asian economies continued to struggle. In
the early part of the period, the strong domestic economy held the upper hand.
However, late in the second quarter, Asian economic problems and their impact on
the domestic economy became a key investor focal point. Economic statistics
seemed to indicate that domestic economic growth was slowing with imports
increasing, exports decreasing, inventories accumulating, and manufacturing
activity slowing. This apparent slowing of the domestic economy caused the
spread between high yield bonds and treasuries to widen approximately 40 basis
points and high quality bonds to outperform high yield bonds in the second
quarter. However, strong first quarter performance for high yield bonds allowed
them to outperform high quality bonds for the six month period. For example, the
Lehman Brothers High Yield Bond Index returned 4.5% for the six months versus
3.94% for the Lehman Brothers Aggregate Bond Index, a measure of high quality
bond performance.
PERFORMANCE
The Portfolio (which returned 4.21%) modestly underperformed the First Boston
High Yield Bond Index (which returned 4.31%) while outperforming the Lehman
Brothers High Yield Bond Index (on a gross basis) during the period.
high
income
bond
Performance
<TABLE>
<CAPTION>
--------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
--------------------------------------------
<S> <C>
Year to Date 4.21%
--------------------------------------------
1 Year 11.45%
--------------------------------------------
5 Year 9.41%
--------------------------------------------
10 Year 10.74%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
--------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
--------------------------------------------------------------
<S> <C> <C>
Viacom Inc. 2.44% 16.71%
--------------------------------------------------------------
TeleWest plc 1.86% 12.72%
--------------------------------------------------------------
Level 3 Communications Inc. 1.85% 12.64%
--------------------------------------------------------------
Tenet Healthcare Corp. 1.46% 9.96%
--------------------------------------------------------------
Revlon Consumer Products Corp 1.30% 8.91%
--------------------------------------------------------------
Nextel Communications Inc. 1.30% 8.89%
--------------------------------------------------------------
Ameriserve Food Dist., Inc. 1.22% 8.34%
--------------------------------------------------------------
Affiliated Newspapers Invts Inc. 1.15% 7.86%
--------------------------------------------------------------
Collins & Aikman Products Co. 1.05% 7.22%
--------------------------------------------------------------
Outdoor Systems Inc. 0.98% 6.74%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
--------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
--------------------------------------------------------
<S> <C>
Cable Television 11.29%
--------------------------------------------------------
Telecommunications & Cellular 10.1%
--------------------------------------------------------
Telecommunications 8.8%
--------------------------------------------------------
Broadcast Radio & Television 7.0%
--------------------------------------------------------
Leisure & Entertainment 5.4%
</TABLE>
High yield bonds are subject to greater risk of principal and income than higher
quality bonds.
15
<PAGE> 17
Management's Discussion & Analysis (Continued)
Several factors impacted performance during the period. The portfolio is
overweight in the broadcast radio and TV sector which generated outstanding
returns led by companies such as Chancellor Media and Sinclair Broadcasting. The
portfolio's cable TV positions outperformed driven by consolidation activity in
the United Kingdom and AT&T's acquisition of Telecommunication, Inc. in the U.S.
which reinforced the attractiveness of the cable platform. The portfolio also
benefited by the strong performance of several specific holdings including
Nextel, Echostar, Six Flags and Dialog Corp. The energy sector was one of the
worst performing sectors in the market due to falling oil prices. The portfolio
had several holdings which underperformed the overall market but the fund did
benefit by being underweight in the sector. On the negative side, the
portfolio's large holdings in telecommunications issues suffered late in the
period given a combination of an uncertain market and the step-up nature of many
of the portfolio's telecommunication holdings. The portfolio was also negatively
impacted by its holdings in Renaissance Cosmetics (subsequently sold), Icon
Health and Fitness, Electronic Retailing and Highwaymaster which underperformed
the overall market based on disappointing financial performance.
OUTLOOK
The performance of the high yield market over the balance of 1998 will be a
function of the domestic economy and the strength of corporate profits. We
believe that the domestic economy is slowing and corporate profits may
disappoint optimistic expectations. Demand in Asia is weak while supply from
that region in industries such as semiconductors and steel is impacting domestic
companies. From a high yield perspective, this weakness could lead to additional
spread widening. However, we believe that the economy will not sink into
recession and additional spread widening should be modest given the approximate
125 basis point widening since early October, 1997. Also the lull in the economy
in the second half of 1998 may set the stage for a continuation of the current
business cycle into 1999 and beyond resulting in subsequent spread tightening.
The portfolio remains overweight in the telecommunication, cable TV and
broadcasting sectors given our belief that secular changes occurring in these
industries will make them superior performers over the next six to twelve
months. We also believe these sectors will outperform in a slowing economic
environment. We are maintaining a bias toward high quality high yield bonds in
light of potential spread widening although we are beginning to look for
attractive opportunities in lower rated bonds given the spread widening to date.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HIGH INCOME BOND
PORTFOLIO AND THE LEHMAN BROTHERS SINGLE "B" INDEX*
[LINE CHART]
* These Indices are unmanaged Indices in which investors cannot invest. Results
for the Indices do not reflect the expenses and investment management fees
incurred by the Portfolio. Past performance is not predictive of future
performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
High Income Bond Portfolio 11.45% 9.41% 10.74%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the High Income Bond
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
16
<PAGE> 18
U.S. Government Bond Portfolio Strong Capital
Management
[LOGO]
Objective
Seeks current income and preservation of capital. Under normal circumstances, at
least 80% of the Portfolio's assets will be invested in U.S. Government
Securities; the remainder may be invested in investment grade corporate
securities and in cash and money market instruments.
Management's Discussion & Analysis
Amid renewed concerns about the global deflationary impact of the financial and
economic crisis in Asia, bond market yields declined in the second quarter. A
fairly dramatic drop of 30 basis points occurred in the long maturities,
compared with little change on the short end, producing a pronounced flattening
in the yield curve.
Adjusted for duration differences, U.S. Treasury securities rose more in price
than either corporate or mortgage bonds. Yield spreads over Treasuries in many
corporate sectors rose to their widest levels in five years amid heavy new
issuance. Asian-related credits came under renewed pressure as fears were
reinforced by news of the deteriorating conditions there. Meanwhile,
mortgage-backed issues suffered from accelerating refinancing activity, which
pushed managers to move into longer Treasuries to maintain the duration of their
portfolios. In the high-yield market, prices actually declined on balance during
the period.
PERFORMANCE
For the quarter, the Salomon Broad Investment Grade bond index returned a strong
2.1% while the average U.S. bond mutual fund gained 1.6%.
The U.S. Government Bond Fund performed in line with its benchmark in the second
quarter. We upgraded the overall credit quality of the portfolio at the
beginning of the quarter by reducing our allocation to corporate bonds. This
change helped performance as corporate bonds generally underperformed Treasury
securities in the period.
u.s. government bond
Performance
<TABLE>
<CAPTION>
--------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
--------------------------------------------
<S> <C>
Year to Date 3.59%
--------------------------------------------
1 Year 10.05%
--------------------------------------------
5 Year 6.75%
--------------------------------------------
10 Year 8.46%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
-------------------------------------------------------------
% OF % OF
AS OF 6/30/98 PORTFOLIO TOP 10
-------------------------------------------------------------
<S> <C> <C>
United States Treasury Bonds 8.32% 17.77%
-------------------------------------------------------------
United States Treasury Nts 6.19% 13.22%
-------------------------------------------------------------
FNMA Remic 5.47% 11.67%
-------------------------------------------------------------
United States Treasury Nts 5.24% 11.20%
-------------------------------------------------------------
FNMA Pool 4.61% 9.85%
-------------------------------------------------------------
United States Treasury Bonds 4.25% 9.09%
-------------------------------------------------------------
Time Warner Inc. 3.38% 7.22%
-------------------------------------------------------------
FHA Project Loan 3.30% 7.05%
-------------------------------------------------------------
Federal National Mtg Assn 3.21% 6.85%
-------------------------------------------------------------
FHA Project Loan Hmpshr 2.85% 6.09%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
--------------------------------------------------------
% OF
AS OF 6/30/98 PORTFOLIO
--------------------------------------------------------
<S> <C>
Mortgage Backed Securities 43.6%
--------------------------------------------------------
U.S. Government Securities 40.2%
--------------------------------------------------------
Corporate Bonds 3.4%
--------------------------------------------------------
Non-Agency MBS 2.8%
--------------------------------------------------------
Municipal Bonds 1.2%
</TABLE>
Investment in the U.S. Government Bond Portfolio is not guaranteed by the U.S.
Government.
17
<PAGE> 19
Management's Discussion & Analysis (Continued)
In addition, our mortgage-backed securities performed significantly better than
mortgages in general, primarily because our mortgage-backed portfolio has better
call-protection than the overall mortgage sector. Finally, we were vigilant
about adding duration to the portfolio as interest rates declined and the
duration of the market index lengthened.
OUTLOOK
We anticipate that the current environment of reasonably stable interest rates
will continue. Inflation will remain stable and while the recent torrid growth
rate of the U.S. economy is likely to slow, it will not warrant policy action by
the Federal Reserve. We anticipate maintaining duration at or slightly above
benchmark. While we remain optimistic about the U.S. economy, we are taking
advantage of easy opportunities to improve credit quality and liquidity with
minimal give-up in yield.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE U.S. GOVERNMENT
BOND PORTFOLIO AND THE LEHMAN BROTHERS GOVERNMENT BOND INDEX*
[LINE CHART]
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
U.S. Government Bond Portfolio 10.05% 6.75% 8.46%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the U.S. Government Bond
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower. Prior to April 1, 1994 results were achieved by different
portfolio managers.
18
<PAGE> 20
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
ADVERTISING -- (1.4%)
Lamar Advertising Company (a) .............. 5,900 $211,663
--------
AEROSPACE -- (0.8%)
TriStar Aerospace Company (a) .............. 8,500 131,750
--------
ASSISTED LIVING -- (1.4%)
Alternative Living Services, Inc. (a) ...... 7,800 210,600
--------
CLIENT-SERVER HELP DESK -- (1.5%)
Pegasystems, Inc. (a) ...................... 8,500 230,563
--------
COMMERCIAL SERVICES -- (5.2%)
Central Parking Corporation ................ 4,000 186,000
Kroll-O'Gara Company (a) ................... 4,800 102,600
Pre-Paid Legal Services, Inc. (a) .......... 8,300 261,969
Rental Service Corporation (a) ............. 7,900 265,637
--------
816,206
COMMUNICATION SERVICES -- (2.0%)
Pacific Gateway Exchange, Inc. ............. 5,400 216,338
Telephone Save Holdings, Inc. (a) .......... 6,600 97,350
--------
313,688
CONTRACT DRILLING -- (0.4%)
Cliffs Drilling Company (a) ................ 1,700 55,781
--------
CONTRACT RESEARCH -- (0.9%)
Kendle International Inc. (a) .............. 4,400 133,100
--------
DATA STORAGE -- (2.0%)
Network Appliance, Inc. (a) ................ 8,200 319,288
--------
DESIGN AUTOMATION SOFTWARE -- (1.0%)
Summit Design, Inc. (a) .................... 11,000 161,563
--------
DIVERSIFIED FINANCIAL SERVICES -- (2.2%)
Amresco, Inc. (a) .......................... 11,600 337,850
--------
DRUGS/PHARMACEUTICALS -- (3.5%)
Jones Pharma, Inc. ......................... 6,300 208,687
Medicis Pharmaceutical Corporation (a) ..... 9,200 335,800
--------
544,487
ELECTRONIC COMMERCE -- (2.0%)
Transaction Systems Architects, Inc. (a) ... 8,000 308,000
--------
EMBEDDED SOFTWARE -- (1.0%)
Wind River Systems, Inc. (a) ............... 4,150 148,881
--------
</TABLE>
See notes to financial statements.
19
<PAGE> 21
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
ENVIRONMENTAL -- (7.3%)
American Disposal Services, Inc. (a) ... 9,100 $ 426,562
Eastern Environmental Services, Inc. (a) 12,800 435,200
Tetra Tech, Inc. (a) ................... 11,068 268,399
----------
1,130,161
HEALTH CARE MANAGEMENT SERVICES -- (1.4%)
Concentra Managed Care, Inc. (a) ....... 8,200 213,200
----------
HOTELS/RESORTS -- (3.9%)
American Skiing Company (a) ............ 11,200 145,600
Prime Hospitality Corporation (a) ...... 9,900 172,631
Vistana, Inc. (a) ...................... 15,500 284,813
----------
603,044
HUMAN RESOURCES -- (2.2%)
Metamor Worldwide, Inc. (a) ............ 9,650 339,559
----------
INFORMATION SYSTEMS -- (2.2%)
Incyte Pharmaceuticals, Inc. (a) ....... 5,200 177,450
QuadraMed Corporation (a) .............. 6,200 169,338
----------
346,788
INVESTMENT FIRMS -- (1.7%)
Sirrom Capital Corporation ............. 10,000 260,000
----------
MARINE CONSTRUCTION -- (0.6%)
Gulf Islands Fabrication, Inc. (a) ..... 4,700 88,125
----------
MARINE SERVICE/EQUIPMENT -- (0.4%)
Gulfmark Offshore, Inc. (a) ............ 3,000 68,250
----------
MEDICAL DEVICES -- (1.3%)
Cyberonics, Inc. (a) ................... 7,300 77,563
Trex Medical Corporation (a) ........... 7,300 120,450
----------
198,013
NETWORKING HARDWARE -- (1.3%)
Apex PC Solutions, Inc. (a) ............ 4,800 133,800
Xylan Corporation (a) .................. 2,400 71,550
----------
205,350
NETWORKING SOFTWARE -- (1.4%)
Veritas Software Company (a) ........... 5,250 217,219
----------
PACKAGED GOODS/COSMETICS -- (1.5%)
United Natural Foods, Inc. (a) ......... 8,400 239,400
----------
PHARMACEUTICAL SERVICES -- (1.3%)
Pharmerica, Inc. (a) ................... 16,500 199,031
----------
</TABLE>
See notes to financial statements.
20
<PAGE> 22
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
PHYSICIAN PRACTICE MANAGEMENT -- (1.7%)
Pediatrix Medical Group (a) .............. 7,200 $267,750
--------
PRECISION INSTRUMENTS -- (2.6%)
Waters Corporation (a) ................... 7,000 412,562
--------
PRINTING SERVICES/FORMS -- (2.3%)
Applied Graphics Technologies (a) ........ 8,000 366,000
--------
PROCESS TECHNOLOGY -- (0.4%)
ITEQ, Inc. (a) ........................... 7,900 58,756
--------
RADIO/TELEVISION -- (1.0%)
Emmis Broadcasting Corporation (a) ....... 3,200 153,000
--------
REAL ESTATE SERVICES -- (0.5%)
CB Richard Ellis Services, Inc. (a) ...... 2,400 80,250
--------
RESTAURANTS -- (0.7%)
CKE Restaurants, Inc. .................... 2,500 103,125
--------
RETAIL-APPAREL -- (0.9%)
Stage Stores, Inc. (a) ................... 3,200 144,800
--------
RETAIL-CATALOG -- (1.8%)
Insight Enterprises, Inc. (a) ............ 6,900 276,000
--------
RETAIL-SPECIALTY -- (1.2%)
Guitar Center, Inc. (a) .................. 6,000 180,750
--------
SEMICONDUCTOR MANUFACTURING -- (3.9%)
ATMI, Inc. (a) ........................... 2,200 33,000
DSP Communications, Inc. (a) ............. 8,500 116,875
Semtech Corporation (a) .................. 7,200 127,350
Vitesse Semiconductor Corporation (a) .... 10,700 330,362
--------
607,587
SEMICONDUCTOR PRODUCT EQUIPMENT -- (0.6%)
Helix Technology Corporation ............. 6,400 96,000
--------
SOFTWARE-CLIENT/SERVER -- (2.2%)
Bea Systems, Inc. (a) .................... 6,600 151,388
Dendrite International, Inc. (a) ......... 5,200 195,650
--------
347,038
SOFTWARE-DESKTOP -- (1.6%)
Visio Corporation (a) .................... 5,200 248,300
--------
</TABLE>
See notes to financial statements.
21
<PAGE> 23
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
SOFTWARE-OTHER -- (1.9%)
JDA Software Group, Inc. (a) ............... 4,200 $ 183,750
Radiant Systems, Inc. (a) .................. 7,700 111,650
-----------
295,400
SPECIAL OUTPATIENT FACILITY -- (4.0%)
National Surgery Centers, Inc. (a) ......... 12,000 348,750
Renal Care Group, Inc. (a) ................. 6,300 277,594
Total Renal Care Holdings, Inc. (a) ........ 1 17
-----------
626,361
SPECIALTY FINANCE -- (1.6%)
HealthCare Financial Partners, Inc. (a) .... 4,100 251,381
-----------
SURFACE -- (1.3%)
Coach USA, Inc. (a) ........................ 4,400 200,750
-----------
SYSTEMS INTEGRATOR -- (10.1%)
Computer Horizons Corporation (a) .......... 9,900 366,919
Computer Management Sciences, Inc. (a) ..... 8,000 190,000
Computer Task Group, Inc. .................. 14,300 479,050
Diamond Technology Partners, Inc. (a) ...... 6,000 181,500
Technology Solutions Company (a) ........... 11,450 362,822
-----------
1,580,291
TELECOMMUNICATION COMPONENTS -- (2.1%)
Sawtek, Inc. (a) ........................... 3,500 51,625
Uniphase Corporation (a) ................... 4,500 282,516
-----------
334,141
TELECOMMUNICATION EQUIPMENT -- (2.2%)
Excel Switching Corporation (a) ............ 3,700 92,037
Tekelec, Inc. (a) .......................... 5,700 255,075
-----------
347,112
TRANSACTIONS PROCESSING -- (2.2%)
Envoy Corporation (a) ...................... 3,000 142,125
PMT Services, Inc. (a) ..................... 8,200 208,587
-----------
350,712
-----------
TOTAL COMMON STOCKS -- (Cost $13,216,296) 98.6% 15,359,626
-----------
</TABLE>
See notes to financial statements.
22
<PAGE> 24
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (2.1%)
State Street Bank and Trust Company (b) ......... 4.500% 07/01/1998 $ 334,042 $ 334,000
------------
TOTAL SHORT TERM INVESTMENT -- (Cost $334,000) 2.1% 334,000
------------
TOTAL INVESTMENTS -- (Cost $13,550,296) ............... 100.7% 15,693,626
OTHER ASSETS LESS LIABILITIES -- ...................... (0.7)% (108,518)
------------ ------------
NET ASSETS -- ......................................... 100.0% $ 15,585,108
============ ============
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 06/30/98,
bearing 4.50% interest, to be repurchased at $334,042 on 07/01/98, is
fully collateralized by a United States Treasury Bond, 9.125%,
05/15/18, with a value of $344,072.
See notes to financial statements.
23
<PAGE> 25
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
AUSTRALIA -- (0.9%)
Evans Deakin Industries Ltd. ............... 18,200 $ 46,320
National Australia Bank .................... 11,754 155,411
QBE Insurance Group ........................ 4,375 15,480
Rio Tinto Ltd. ............................. 2,580 30,750
----------
247,961
BRAZIL -- (0.0%)
Cia Riograndense de Telecomunicacoes ....... 6,767 7,378
----------
CANADA -- (3.5%)
National Bank of Canada .................... 8,800 171,927
Potash Corporation of Saskatchewan, Inc. ... 1,120 84,330
Quebecor ................................... 12,539 248,812
Seven Seas Petroleum, Inc. (a) ............ 4,600 94,300
Toronto Dominion Bank Ontario .............. 6,700 304,142
----------
903,511
FINLAND -- (0.4%)
Valmet Oyj ................................. 6,200 107,009
----------
FRANCE -- (7.6%)
Axa-UAP .................................... 5,200 584,879
Carbone Lorraine ........................... 1,000 88,658
Credit Commerce France ..................... 1,301 109,534
Lafarge .................................... 2,166 223,919
Michelin ................................... 1,327 76,604
Pernod Ricard .............................. 4,450 308,409
Societe Eurafrance S.A ..................... 665 417,983
Society Elf Aquitaine ...................... 1,262 177,432
----------
1,987,418
GERMANY -- (3.9%)
Bayer AG ................................... 2,700 139,832
Karstadt AG ................................ 1,150 559,552
Schmalbach Lubeca AG ....................... 475 119,840
Springer Axel Verl ......................... 263 193,956
----------
1,013,180
ITALY -- (1.2%)
Arnoldo Mondadori Editore .................. 26,300 310,848
----------
</TABLE>
See notes to financial statements.
24
<PAGE> 26
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
JAPAN -- (4.2%)
Dai-Tokyo Fire & Marine ....................... 58,000 $ 202,603
Fuji Photo Film Company ....................... 6,000 209,590
Fujitsu ....................................... 14,000 147,827
Nichiei Company ............................... 2,200 150,199
Sony Corporation .............................. 4,600 397,555
----------
1,107,774
NETHERLANDS -- (3.0%)
Fugro N.V ..................................... 3,480 138,669
Philips Electronic ............................ 2,550 214,513
Unilever N.V .................................. 2,731 216,841
Van Ommeren Kon ............................... 5,400 226,865
----------
796,888
SPAIN -- (1.7%)
Banco Santande S.A. (a) ...................... 9,780 250,320
Repsol S.A .................................... 3,770 207,737
----------
458,057
SWEDEN -- (7.0%)
Astra AB ...................................... 32,070 655,392
Electrolux AB (a) ............................ 10,000 171,765
Getinge Industrier AB ......................... 6,600 134,880
Granges AB .................................... 1,000 18,305
Lifco AB (a) ................................. 1,320 6,454
Pharmacia & Upjohn, Inc. ...................... 2,655 122,165
Skandinaviska Enskilda Banken ................. 27,300 467,208
Volvo AB ...................................... 8,100 241,192
----------
1,817,361
SWITZERLAND -- (8.9%)
Edipresse S.A ................................. 750 206,531
Hero AG ....................................... 160 108,829
Lindt & Spruengli ............................. 130 335,666
Nestle S.A .................................... 490 1,050,347
Novartis AG ................................... 310 516,701
SGS Societe General de Surveillance Holding S.A 55 93,380
----------
2,311,454
UNITED KINGDOM -- (17.3%)
B.A.T. Industries ............................. 27,900 279,508
British Airways Plc ........................... 10,000 108,280
British Telecommunications Plc ................ 30,700 379,322
Compass Group ................................. 34,600 398,624
Cordiant Commerce ............................. 58,700 129,865
Diageo Plc .................................... 36,058 427,463
</TABLE>
See notes to financial statements.
25
<PAGE> 27
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
UNITED KINGDOM -- (CONTINUED)
Glaxo Wellcome Plc ........................ 11,421 $ 343,062
Lloyds TSB Group .......................... 21,902 306,638
London International Group ................ 124,300 434,804
Lonrho .................................... 14,375 67,445
Lonrho Africa ............................. 14,375 17,641
Pearson ................................... 15,265 279,858
Pilkington (a) ........................... 94,000 173,432
Saatchi & Saatchi ......................... 58,700 162,699
Smithkline Beecham ........................ 24,454 298,678
Vardon .................................... 62,100 186,639
Vodafone Group ............................ 40,137 509,662
----------
4,503,620
UNITED STATES -- (35.2%)
Action Performance Companies, Inc. (a) ... 2,500 80,469
ADVO, Inc. (a) ........................... 5,300 149,394
Antec Corporation (a) .................... 7,200 166,950
Applied Power, Inc. ....................... 4,200 144,375
Artisan Components, Inc. (a) ............. 5,800 78,300
AXENT Technologies, Inc. (a) ............. 6,000 183,750
Big Flower Holdings, Inc. (a) ............ 4,200 126,000
Bright Horizons, Inc. (a) ................ 2,900 81,200
Broadcom Corporation (a) ................. 500 36,813
Brylane, Inc. (a) ........................ 2,300 105,800
CCC Information Services Group, Inc. (a) . 7,400 122,100
Cendant Corporation (a) .................. 9 188
Centennial Bancorp ........................ 7,800 140,400
ChiRex, Inc. (a) ......................... 2,200 38,638
Cognex Corporation (a) ................... 900 16,650
Computer Learning Centers, Inc. (a) ...... 12,500 310,937
Core Laboratories N.V. (a) ............... 5,600 121,100
CorporateFamily Solutions, Inc. (a) ...... 2,700 67,500
Coulter Pharmaceutical, Inc. (a) ......... 3,000 91,125
Covenant Transport, Inc. (a) ............. 5,300 103,350
CSG Systems International, Inc. (a) ...... 3,500 164,062
Cyberonics, Inc. (a) ..................... 3,200 34,000
DA Consulting Group, Inc. (a) ............ 4,000 57,500
Delphi Financial Group, Inc. .............. 1,428 80,414
Dime Community Bancorp, Inc. .............. 6,100 169,275
Dominick's Supermarkets, Inc. (a) ........ 3,100 138,144
E.W. Blanch Holdings, Inc. ................ 2,500 91,875
Electronics for Imaging, Inc. (a) ........ 6,500 137,312
FileNET Corporation (a) .................. 5,000 144,375
First Alliance Company (a) ............... 7,600 53,200
Forrester Research, Inc. (a) ............. 4,300 170,925
</TABLE>
See notes to financial statements.
26
<PAGE> 28
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
UNITED STATES -- (CONTINUED)
Friede Goldman International, Inc. (a) .... 2,800 $ 80,850
General Cable Corporation .................. 6,750 194,906
Genesis Health Ventures, Inc. (a) ......... 4,000 100,000
Health Management Associates (a) .......... 4,200 140,437
Hearst-Argyle Television, Inc. (a) ........ 4,600 184,000
Helen Troy Ltd. (a) ....................... 7,600 167,200
Hyperion Telecommunications (a) ........... 3,200 50,200
IDEXX Laboratories, Inc. (a) .............. 4,000 99,500
Interim Services, Inc. (a) ................ 5,000 160,625
InterWest Bancorp, Inc. .................... 4,300 186,512
JDA Software Group, Inc. (a) .............. 2,600 113,750
K & G Mens Center Inc. (a) ................ 4,600 104,075
Kaydon Corporation ......................... 3,400 120,062
Lason, Inc. (a) ........................... 2,000 109,000
Lattice Semiconductor Corp. (a) ........... 3,500 99,422
Lycos, Inc. (a) ........................... 1,500 113,063
Market Facts, Inc. (a) .................... 5,100 110,925
MAXIMUS, Inc. (a) ......................... 400 11,500
Mercury Interactive Corporation (a) ....... 3,200 142,800
Mesaba Holdings, Inc. (a) ................. 6,450 148,350
Michaels Stores, Inc. (a) ................. 4,600 162,294
Mobius Management Systems, Inc. (a) ....... 2,300 34,500
National R.V. Holdings, Inc. (a) .......... 3,500 157,938
Newpark Resource, Inc. (a) ................ 10,300 114,588
Oneida Ltd. ................................ 4,600 140,875
Overseas Shipholding Group, Inc. ........... 3,100 63,163
Penn-America Group, Inc. ................... 12,900 174,150
PRI Automation, Inc. (a) .................. 6,100 104,081
ProMedCo Management Company (a) ........... 5,600 57,400
Roper Industries, Inc. ..................... 4,800 125,400
Russ Berrie & Company, Inc. ................ 7,500 187,500
Scientific-Atlanta, Inc. ................... 6,200 157,325
Showbiz Pizza Time, Inc. (a) .............. 3,700 149,156
Sinclair Broadcast Group, Inc. (a) ........ 3,100 89,125
SIPEX Corporation (a) ..................... 5,500 118,250
Sis Bancorp, Inc. .......................... 3,200 124,000
Suiza Foods Corporation (a) ............... 3,000 179,062
Superior TeleCom, Inc. ..................... 4,300 178,987
TCF Financial Corporation .................. 2,000 59,000
The DII Group, Inc. (a) ................... 11,500 196,219
The Good Guys, Inc. (a) ................... 11,300 152,197
The Scotts Company ......................... 3,900 145,275
Total Renal Care Holdings, Inc. (a) ....... 3,033 104,639
Twinlab Corporation (a) ................... 2,200 96,113
</TABLE>
See notes to financial statements.
27
<PAGE> 29
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C> <C>
COMMON STOCKS
UNITED STATES -- (CONTINUED)
Valassis Communications, Inc. (a) ............ 4,500 $ 173,531
Viatel, Inc. (a) ............................. 4,500 76,500
Wesley Jessen VisionCare, Inc. (a) ........... 700 16,188
-----------
9,180,754
-----------
TOTAL COMMON STOCKS -- (Cost $19,562,097) .. 94.8% 24,753,213
-----------
DEPOSITARY RECEIPTS
UNITED KINGDOM -- (0.5%)
Smithkline Beecham Plc ........................ 2,000 121,001
-----------
TOTAL DEPOSITARY RECEIPTS -- (Cost $101,850) 0.5% 121,001
-----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT
<S> <C> <C> <C> <C> <C>
CORPORATE BOND
BRAZIL -- (0.0%)
Vale Rio Doce Cia (b) ............................. 0.000% 12/31/1999 $ 9,500 0
------------
TOTAL CORPORATE BOND -- (Cost $0) .............. 0.0% 0
------------
SHORT TERM INVESTMENT
UNITED STATES -- (4.7%)
Federal Farm Credit Bank Consolidated
Discount Note .................................. 5.400% 07/01/1998 1,230,000 1,230,000
------------
TOTAL SHORT TERM INVESTMENT -- (Cost $1,230,000) 4.7% 1,230,000
------------
TOTAL INVESTMENTS -- (Cost $20,893,947) ................. 100.0% 26,104,214
OTHER ASSETS LESS LIABILITIES -- ........................ 0.0% (8,991)
------------ ------------
NET ASSETS -- ........................................... 100.0% $ 26,095,223
============ ============
</TABLE>
(a) Non-income producing security.
(b) Zero coupon security.
See notes to financial statements.
28
<PAGE> 30
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
ANALYSIS OF INDUSTRY CLASSIFICATIONS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS VALUE
-------- ---------- -----
<S> <C> <C>
Airlines .................................... 1.0% $ 256,630
Automobiles ................................. 0.9 241,192
Automotive Parts ............................ 0.3 76,604
Banking ..................................... 8.0 2,074,855
Broadcasting/Publishing ..................... 3.1 801,795
Building Materials & Construction ........... 1.5 381,857
Business Services ........................... 1.4 365,162
Cables/Fiberoptics .......................... 0.7 194,906
Chemicals ................................... 0.5 139,832
Commercial Services ......................... 3.0 786,211
Computer Services ........................... 0.2 57,500
Computer Software ........................... 2.8 732,238
Consumer Electronics ........................ 2.3 612,068
Consumer Products ........................... 2.7 709,730
Cosmetics & Toiletries ...................... 0.6 167,200
Diversified ................................. 1.2 301,927
Drugs & Health Care ......................... 7.4 1,939,812
Educational Services ........................ 3.0 790,761
Electrical Equipment ........................ 1.1 284,877
Electronics ................................. 3.5 919,150
Energy Sources .............................. 1.5 385,169
Engineering & Construction .................. 0.5 138,669
Fertilizer .................................. 0.9 229,605
Financial Services .......................... 6.9 1,802,911
Food & Beverages ............................ 9.2 2,409,776
Graphic-Image Processing .................... 0.5 137,312
Health & Personal Care ...................... 3.4 877,866
Health Care Management Services ............. 0.8 197,837
Hotels, Leisure & Tourism ................... 1.0 267,108
Insurance ................................... 4.4 1,149,402
Investment Companies ........................ 1.6 417,983
Manufacturing ............................... 1.6 414,979
Medical Equipment ........................... 1.1 274,834
Metals ...................................... 0.2 49,054
Oil & Gas ................................... 0.4 94,300
Oil Services ................................ 2.1 543,403
Packaging ................................... 0.5 119,840
Printing .................................... 0.7 173,531
Publishing .................................. 4.4 1,138,125
Restaurants ................................. 0.6 149,156
Retail-Apparel .............................. 0.4 104,075
Retail-Catalog .............................. 0.4 105,800
</TABLE>
See notes to financial statements.
29
<PAGE> 31
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
ANALYSIS OF INDUSTRY CLASSIFICATIONS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS VALUE
-------- ---------- -----
<S> <C> <C>
Retail-Grocery ............................ 0.5% $ 138,144
Retail-Trade .............................. 3.3 874,043
Special Outpatient Facility ............... 0.4 104,639
Surface Transportation .................... 0.6 166,513
Telecommunication Equipment ............... 1.9 503,263
Telecommunications ........................ 3.6 946,562
Telephone ................................. 0.3 76,500
Tobacco ................................... 1.1 279,508
----------- -----------
TOTAL .................................. 100.0% $26,104,214
=========== ===========
</TABLE>
See notes to financial statements.
30
<PAGE> 32
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
APPAREL & TEXTILES -- (1.0%)
Westpoint Stevens, Inc. (a) ................ 23,000 $ 759,000
----------
BANKS -- (7.7%)
BankAmerica Corporation .................... 18,000 1,555,875
Fifth Third Bancorp ........................ 21,225 1,337,175
Norwest Corporation ........................ 16,000 598,000
Star Banc Corporation ...................... 12,000 766,500
State Street Corporation ................... 9,000 625,500
Zions Bancorporation ....................... 14,000 743,750
----------
5,626,800
BUSINESS SERVICES -- (1.3%)
Accustaff, Inc. (a) ........................ 30,000 937,500
----------
COMMUNICATIONS EQUIPMENT -- (2.3%)
Tellabs, Inc. (a) .......................... 23,500 1,683,187
----------
COMPUTER RELATED -- (8.1%)
Cisco Systems, Inc. (a) .................... 28,500 2,623,781
Compaq Computer Corporation ................ 21,500 610,063
Dell Computer Corporation (a) .............. 9,000 835,312
EMC Corporation (a) ........................ 40,500 1,814,906
----------
5,884,062
COMPUTER SOFTWARE -- (13.6%)
America Online, Inc. ....................... 8,000 848,000
BMC Software, Inc. (a) ..................... 49,000 2,544,937
Computer Associates International, Inc. .... 17,575 976,511
Compuware Corporation (a) .................. 25,000 1,278,125
HBO & Company .............................. 24,000 846,000
Microsoft Corporation (a) .................. 21,500 2,330,062
Parametric Technology Corporation (a) ...... 14,500 393,313
Peoplesoft, Inc. (a) ....................... 14,000 658,000
----------
9,874,948
COSMETICS & TOILETRIES -- (2.8%)
CVS Corporation ............................ 8,546 332,760
Gillette Company ........................... 23,000 1,303,812
Walgreen Company ........................... 9,000 371,813
----------
2,008,385
DRUGS -- (11.0%)
Eli Lilly & Company ........................ 18,000 1,189,125
Merck & Company, Inc. ...................... 6,500 869,375
Pfizer, Inc. ............................... 21,500 2,336,781
Schering Plough Corporation ................ 20,000 1,832,500
Warner Lambert Company ..................... 16,500 1,144,688
Watson Pharmaceuticals, Inc. (a) ........... 14,000 653,625
----------
8,026,094
</TABLE>
See notes to financial statements.
31
<PAGE> 33
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
ELECTRIC POWER -- (2.2%)
AES Corporation (a) ...................... 30,500 $1,603,156
----------
ELECTRICAL EQUIPMENT -- (0.6%)
General Electric Company ................. 4,500 409,500
----------
ELECTRONICS -- (0.5%)
Applied Power, Inc. ...................... 9,500 326,563
----------
ENVIRONMENTAL -- (1.6%)
Allied Waste Industries, Inc. (a) ........ 15,000 360,000
Tyco International, Ltd. ................. 13,000 819,000
----------
1,179,000
EXPLORATION & DRILLING -- (2.2%)
Smith International, Inc. (a) ............ 13,500 469,969
Transocean Offshore, Inc. ................ 25,000 1,112,500
----------
1,582,469
FINANCIAL SERVICES -- (4.6%)
Federal National Mortgage Association .... 10,000 607,500
FINOVA Group, Inc. ....................... 19,000 1,075,875
Paychex, Inc ............................. 9,000 365,625
Sunamerica, Inc. ......................... 23,000 1,321,062
----------
3,370,062
FOOD RETAILERS -- (1.5%)
Safeway, Inc. (a) ........................ 26,500 1,078,219
----------
INSURANCE -- (7.7%)
Allstate Corporation ..................... 11,000 1,007,188
American International Group, Inc. ....... 11,000 1,606,000
Conseco, Inc. ............................ 7,000 327,250
Progressive Corporation .................. 4,500 634,500
Travelers, Inc. .......................... 33,500 2,030,937
----------
5,605,875
LEISURE & ENTERTAINMENT -- (0.6%)
Carnival Corporation ..................... 10,000 396,250
----------
MEDIA -- (2.0%)
Clear Channel Communications (a) ......... 10,000 1,091,250
Tele Communications, Inc. (a) ............ 10,000 384,375
----------
1,475,625
MEDICAL PRODUCTS & SUPPLIES -- (3.2%)
Guidant Corporation ...................... 13,500 962,719
Medtronic, Inc. .......................... 15,000 956,250
Sofamor Danek Group, Inc. (a) ............ 4,500 389,531
----------
2,308,500
</TABLE>
See notes to financial statements.
32
<PAGE> 34
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
MEDICAL SUPPLIES & SERVICES -- (3.1%)
Cardinal Health, Inc. ...................... 14,500 $ 1,359,375
Health Management Associates, Inc. (a) ..... 11,000 367,813
Lincare Holdings, Inc. (a) ................. 9,000 378,562
Quintiles Transnational Corporation (a) .... 3,500 172,156
-----------
2,277,906
OIL SERVICES -- (2.1%)
Baker Hughes, Inc. ......................... 22,500 777,657
Petroleum Geo-Services (a) ................. 14,000 427,000
Schlumberger, Ltd. ......................... 4,500 307,406
-----------
1,512,063
PRINTING & PUBLISHING -- (4.0%)
Omnicom Group .............................. 44,000 2,194,500
The New York Times Company ................. 9,000 713,250
-----------
2,907,750
RETAIL -- (2.1%)
Dayton Hudson Corporation .................. 23,000 1,115,500
Dollar Tree Stores, Inc. (a) ............... 10,500 426,563
-----------
1,542,063
RETAIL-DISCOUNT -- (2.0%)
Consolidated Stores Corporation (a) ........ 9,437 342,091
Dollar General Corporation ................. 19,000 726,864
TJX Companies, Inc. ........................ 16,000 386,000
-----------
1,454,955
RETAIL-SPECIALTY -- (4.8%)
Bed Bath & Beyond, Inc. (a) ................ 14,000 725,375
Gap, Inc. .................................. 13,500 831,938
Home Depot, Inc. ........................... 11,000 913,687
Staples, Inc. (a) .......................... 24,500 708,969
United Stationers, Inc. (a) ................ 5,200 336,700
-----------
3,516,669
SAVINGS & LOANS -- (0.9%)
H.F. Ahmanson & Company .................... 9,000 639,000
-----------
TELECOMMUNICATIONS-CELLULAR/WIRELESS -- (1.3%)
AirTouch Communications, Inc. (a) .......... 15,500 905,781
-----------
TELECOMMUNICATIONS-LONG DISTANCE -- (1.2%)
Worldcom, Inc. ............................. 18,000 871,875
-----------
TRUCKING & SHIPPING -- (0.9%)
Airbourne Freight Corporation .............. 18,000 628,875
-----------
TOTAL COMMON STOCKS -- (Cost $44,866,565) 96.9% 70,392,132
-----------
</TABLE>
See notes to financial statements.
33
<PAGE> 35
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (3.0%)
State Street Bank and Trust Company (b) ........... 4.500% 07/01/1998 $ 2,214,277 $ 2,214,000
-----------
TOTAL SHORT TERM INVESTMENT -- (Cost $2,214,000) 3.0% 2,214,000
-----------
TOTAL INVESTMENTS -- (Cost $47,080,565) ................. 99.9% 72,606,132
OTHER ASSETS LESS LIABILITIES -- ........................ 0.1% 73,860
----------- -----------
NET ASSETS -- ........................................... 100.0% $72,679,992
=========== ===========
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 06/30/98,
bearing 4.50% interest, to be repurchased at $2,214,277 on 07/01/98, is
fully collateralized by a United States Treasury Bond, 9.125%,
05/15/18, with a value of $2,261,044.
See notes to financial statements.
34
<PAGE> 36
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
AEROSPACE & DEFENSE -- (3.5%)
Aeroquip Vickers, Inc. ....................... 800 $ 46,700
General Dynamics Corporation ................. 3,000 139,500
Lockheed Martin Corporation .................. 2,400 254,100
United Technologies Corporation .............. 2,400 222,000
----------
662,300
AUTOMOTIVE -- (1.8%)
Ford Motor Company ........................... 2,600 153,400
General Motors Corporation ................... 1,600 106,900
PACCAR, Inc. ................................. 1,500 78,375
----------
338,675
BANKS -- (7.8%)
AmSouth Bancorporation ....................... 1,650 64,866
BankAmerica Corporation ...................... 1,600 138,300
Chase Manhattan Corporation .................. 5,200 392,600
Citicorp ..................................... 400 59,700
Comerica, Inc. ............................... 3,100 205,375
First Union Corporation ...................... 1,700 99,025
NationsBank Corporation ...................... 5,200 397,800
Republic New York Corporation ................ 2,000 125,875
----------
1,483,541
BROADCASTING/PUBLISHING -- (1.0%)
Gannett Company, Inc. ........................ 2,600 184,762
----------
BUILDING MATERIALS & CONSTRUCTION -- (0.9%)
Lowe's Companies, Inc. ....................... 2,800 113,575
USG Corporation .............................. 1,000 54,125
----------
167,700
BUSINESS SERVICES -- (0.9%)
Accustaff, Inc. (a) .......................... 3,900 121,875
Manpower, Inc. ............................... 1,400 40,162
----------
162,037
CAPITAL EQUIPMENT -- (1.0%)
Deere & Company .............................. 3,700 195,637
----------
CHEMICALS & PLASTICS -- (2.8%)
Dow Chemical Company ......................... 600 58,013
duPont (E.I.) deNemours ...................... 1,100 82,087
Goodrich (B.F.) Company ...................... 900 44,663
PPG Industries, Inc. ......................... 2,800 194,775
Solutia, Inc. ................................ 5,100 146,306
----------
525,844
COMMERCIAL SERVICES -- (0.0%)
Dunn & Bradstreet Corporation ................ 100 3,613
----------
</TABLE>
See notes to financial statements.
35
<PAGE> 37
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
COMPUTERS & BUSINESS EQUIPMENT -- (1.0%)
Hewlett Packard Company ........................ 600 $ 35,925
International Business Machines Corporation .... 1,400 160,737
----------
196,662
COMPUTER RELATED -- (3.9%)
Cisco Systems, Inc. (a) ........................ 900 82,856
Computer Sciences Corporation .................. 900 57,600
EMC Corporation (a) ............................ 1,800 80,663
Intel Corporation .............................. 2,300 170,487
Lexmark International Group, Inc. (a) .......... 1,800 109,800
Storage Technology Corporation (a) ............. 2,200 95,425
Unisys Corporation (a) ......................... 5,000 141,250
----------
738,081
COMPUTER SOFTWARE -- (1.5%)
Autodesk, Inc. ................................. 3,600 139,050
Computer Associates International, Inc. ........ 2,800 155,575
----------
294,625
COSMETICS & TOILETRIES -- (0.4%)
Avon Products, Inc. ............................ 500 38,750
Gillette Company ............................... 800 45,350
----------
84,100
DRUGS -- (8.1%)
American Home Products Corporation ............. 800 41,400
Amgen, Inc. .................................... 4,500 294,187
Bristol Myers Squibb Company ................... 2,900 333,319
Cardinal Health, Inc. .......................... 1,200 112,500
Eli Lilly & Company ............................ 800 52,850
Merck & Company, Inc. .......................... 1,700 227,375
Pfizer, Inc. ................................... 3,600 391,275
Schering-Plough Corporation .................... 1,000 91,625
----------
1,544,531
ELECTRIC UTILITIES -- (1.7%)
DTE Energy Company ............................. 900 36,337
Energy East Corporation (a) .................... 1,400 58,275
Firstenergy Corporation ........................ 1,200 36,900
GPU, Inc. ...................................... 600 22,688
PP&L Resources, Inc. ........................... 1,900 43,106
Public Service Enterprise Group ................ 3,600 123,975
----------
321,281
ELECTRICAL EQUIPMENT -- (2.7%)
General Electric Company ....................... 5,700 518,700
----------
ELECTRONICS -- (0.6%)
Tandy Corporation .............................. 2,200 116,738
----------
</TABLE>
See notes to financial statements.
36
<PAGE> 38
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
FINANCIAL SERVICES -- (3.8%)
American Express Company ..................... 1,200 $136,800
Countrywide Credit Industries, Inc. .......... 1,900 96,425
Federal National Mortgage Association ........ 3,900 236,925
Marsh & McLennan Companies, Inc. ............. 3,300 199,444
Travelers Group, Inc. ........................ 800 48,500
--------
718,094
FOOD & BEVERAGES -- (4.5%)
Anheuser-Busch Companies, Inc. ............... 2,800 132,125
Coca-Cola Company ............................ 4,000 342,000
Interstate Bakeries Corporation .............. 5,100 169,256
PepsiCo, Inc. ................................ 3,300 135,919
Quaker Oats Company .......................... 1,300 71,419
--------
850,719
HEALTH CARE -- (1.3%)
Columbia / HCA Healthcare Corporation ........ 3,200 93,200
Wellpoint Health Networks, Inc. (a) .......... 2,000 148,000
--------
241,200
HIGH TECHNOLOGY MANUFACTURING -- (4.0%)
Honeywell, Inc. .............................. 2,500 208,906
Johnson Controls, Inc. ....................... 1,800 102,938
Lucent Technologies, Inc. .................... 5,500 457,531
--------
769,375
HOUSEHOLD PRODUCTS -- (1.4%)
National Service Industries, Inc. ............ 1,700 86,488
Premark International, Inc. .................. 1,000 32,250
Procter & Gamble Company ..................... 1,700 154,806
--------
273,544
INSURANCE -- (3.2%)
Allstate Corporation ......................... 3,400 311,313
American General Corporation ................. 700 49,831
American International Group, Inc. ........... 700 102,200
Equitable Companies, Inc. .................... 2,000 149,875
--------
613,219
INVESTMENT COMPANIES -- (2.7%)
Bear Stearns Companies, Inc. ................. 700 39,813
Lehman Brothers Holdings, Inc. ............... 1,700 131,856
Morgan Stanley, Dean Witter,
Discover and Company ..................... 3,800 347,225
--------
518,894
LEISURE & ENTERTAINMENT -- (0.8%)
Carnival Corporation ......................... 2,400 95,100
The Walt Disney Company ...................... 600 63,037
--------
158,137
</TABLE>
See notes to financial statements.
37
<PAGE> 39
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
MACHINERY & EQUIPMENT -- (1.5%)
Caterpillar, Inc. ............................ 4,400 $232,650
Ingersoll-Rand Company ....................... 1,200 52,875
--------
285,525
MEDICAL SUPPLIES & SERVICES -- (2.4%)
Abbott Laboratories .......................... 600 24,525
Becton, Dickinson & Company .................. 1,100 85,388
Guidant Corporation .......................... 1,800 128,362
Johnson & Johnson ............................ 1,300 95,875
McKesson Corporation ......................... 1,600 130,000
--------
464,150
OFFICE SUPPLIES & EQUIPMENT -- (1.1%)
Xerox Corporation ............................ 2,000 203,250
--------
OIL & GAS -- (3.8%)
Apache Corporation ........................... 3,600 113,400
Exxon Corporation ............................ 5,300 377,956
Mobil Corporation ............................ 3,000 229,875
--------
721,231
PAPER -- (0.4%)
Fort James Corporation ....................... 600 26,700
Georgia Pacific Timber Corporation ........... 1,800 41,513
--------
68,213
PETROLEUM SERVICES -- (2.3%)
Amoco Corporation ............................ 4,800 199,800
Chevron Corporation .......................... 1,300 107,981
Rowan Companies, Inc. (a) .................... 2,200 42,763
Texaco, Inc. ................................. 1,600 95,500
--------
446,044
PRINTING & PUBLISHING -- (0.8%)
A.H. Belo Corporation ........................ 600 14,625
Valassis Communications, Inc. (a) ............ 3,500 134,969
--------
149,594
RETAIL -- (4.5%)
Dayton Hudson Corporation .................... 2,600 126,100
Federated Department Stores, Inc. (a) ........ 2,300 123,769
May Department Stores Company ................ 2,500 163,750
Sears, Roebuck & Company ..................... 3,300 201,506
Wal-Mart Stores, Inc. ........................ 4,100 249,075
--------
864,200
</TABLE>
See notes to financial statements.
38
<PAGE> 40
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
RETAIL-DISCOUNT -- (1.2%)
TJX Companies, Inc. .......................... 9,600 $ 231,600
-----------
RETAIL-SPECIALTY -- (3.5%)
American Greetings Corporation ............... 1,100 56,031
Costco Companies, Inc. (a) ................... 2,300 145,044
General Nutrition Companies, Inc. (a) ........ 4,400 136,950
Home Depot, Inc. ............................. 300 24,919
Intimate Brands, Inc. ........................ 1,700 46,856
Kroger Company (a) ........................... 3,000 128,625
Ross Stores, Inc. ............................ 1,300 55,900
VF Corporation ............................... 1,400 72,100
-----------
666,425
SOFTWARE -- (5.1%)
BMC Software, Inc. (a) ....................... 2,000 103,875
Cadence Design Systems, Inc. (a) ............. 2,500 78,125
Microsoft Corporation (a) .................... 5,800 628,575
Oracle System Corporation (a) ................ 6,900 169,481
-----------
980,056
STEEL -- (0.9%)
USX-US Steel Group, Inc. ..................... 5,200 171,600
-----------
TELECOMMUNICATIONS -- (7.0%)
Ameritech Corporation ........................ 4,800 215,400
AT&T Corporation ............................. 4,800 274,200
Bell Atlantic Corporation .................... 5,624 256,595
BellSouth Corporation ........................ 2,100 140,962
General Instrument Corporation (a) ........... 2,200 59,813
GTE Corporation .............................. 1,100 61,187
SBC Communications, Inc. ..................... 4,000 160,000
U.S. West, Inc. (a) .......................... 3,400 159,800
-----------
1,327,957
TOBACCO -- (0.5%)
Philip Morris Companies, Inc. ................ 2,500 98,438
-----------
TRANSPORTATION -- (0.6%)
Burlington Northern Santa Fe Corporation ..... 500 49,094
Trinity Industries, Inc. ..................... 1,700 70,550
-----------
119,644
-----------
TOTAL COMMON STOCKS -- (Cost $15,804,123) . 96.9% 18,479,936
-----------
</TABLE>
See notes to financial statements.
39
<PAGE> 41
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST
AND TITLE OF ISSUE RATE SHARES VALUE
<S> <C> <C> <C> <C>
MUTUAL FUNDS -- (2.9%)
Dreyfus Cash Management Plus (b) ....... 5.50% 561,703 $ 561,703
-----------
TOTAL MUTUAL FUNDS -- (Cost $561,703) 2.9% 561,703
-----------
TOTAL INVESTMENTS -- (Cost $16,365,826) ...... 99.8% 19,041,639
OTHER ASSETS LESS LIABILITIES -- ............. 0.2% 29,520
----------- -----------
NET ASSETS -- ................................ 100.0% $19,071,159
=========== ===========
</TABLE>
(a) Non-income producing security.
(b) Interest rate shown is the 7 day yield as of June 30, 1998.
See notes to financial statements.
40
<PAGE> 42
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
AEROSPACE & DEFENSE -- (6.6%)
Gulfstream Aerospace Corporation (a) .......... 8,800 $ 409,200
Litton Industries, Inc. (a) ................... 3,100 182,900
Lockheed Martin Corporation ................... 2,500 264,688
Raytheon Company, Class A ..................... 11,250 648,281
TRW, Inc. ..................................... 6,100 333,212
United Technologies Corporation ............... 2,850 263,625
----------
2,101,906
ALUMINUM -- (0.8%)
Alumax, Inc. .................................. 1,827 84,727
Aluminum Company of America ................... 2,400 158,250
----------
242,977
AUTOMOTIVE -- (3.5%)
Chrysler Corporation .......................... 11,800 665,225
Ford Motor Company ............................ 8,000 472,000
----------
1,137,225
BANKS AND SAVINGS -- (3.9%)
Bank of New York Company, Inc. ................ 3,700 224,544
Citicorp ...................................... 4,900 731,325
First Chicago NBD Corporation ................. 3,300 292,462
----------
1,248,331
BUILDING MATERIALS & CONSTRUCTION -- (2.3%)
American Standard Companies, Inc. (a) ......... 5,700 254,719
USG Corporation ............................... 8,950 484,418
----------
739,137
BUSINESS SERVICES -- (1.4%)
Deluxe Corporation ............................ 3,400 121,763
H & R Block, Inc. ............................. 3,100 130,587
WPP Group Plc ................................. 29,900 196,077
----------
448,427
CAPITAL EQUIPMENT -- (2.3%)
Emerson Electric Company ...................... 3,500 211,312
Harnischfeger Industries, Inc. ................ 4,700 133,069
ITT Industries, Inc. .......................... 10,200 381,225
----------
725,606
CHEMICALS -- (1.5%)
Ferro Corporation ............................. 6,100 154,406
Union Carbide Corporation ..................... 6,000 320,250
----------
474,656
COMPUTERS -- (2.1%)
Compaq Computer Corporation ................... 23,500 666,812
----------
COMPUTERS & BUSINESS EQUIPMENT -- (2.4%)
International Business Machines Corporation ... 5,600 642,950
Pitney Bowes, Inc. ............................ 2,600 125,125
----------
768,075
</TABLE>
See notes to financial statements.
41
<PAGE> 43
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
COMPUTER RELATED -- (1.7%)
Allied Signal, Inc. ........................... 5,800 $ 257,375
Sun Microsystems, Inc. (a) .................... 6,300 273,656
----------
531,031
CONSTRUCTION MATERIALS -- (1.2%)
Harsco Corporation ............................ 8,500 389,406
----------
DRUGS -- (3.0%)
Baxter International, Inc. .................... 6,100 328,256
Merck & Company, Inc. ......................... 4,700 628,625
----------
956,881
ECOLOGICAL SERVICES & EQUIPMENT -- (1.3%)
USA Waste Services, Inc. (a) .................. 8,800 434,500
----------
ELECTRIC UTILITIES -- (2.1%)
Allegheny Energy, Inc. ........................ 5,500 165,688
American Electric Power Company, Inc. ......... 3,900 176,962
DQE, Inc. ..................................... 1,000 36,000
Illinova Corporation .......................... 4,400 132,000
Wisconsin Energy Corporation .................. 5,900 179,212
----------
689,862
ELECTRONICS -- (1.6%)
Dallas Semiconductor Corporation .............. 3,300 102,300
National Semiconductor Corporation (a) ........ 4,500 59,344
Philips Electronics N.V ....................... 2,400 204,000
Teradyne, Inc. (a) ............................ 5,400 144,450
----------
510,094
ENERGY -- (0.8%)
Occidental Petroleum Corporation .............. 10,000 270,000
----------
FINANCIAL SERVICES -- (9.8%)
American Express Company ...................... 1,400 159,600
Associates First Capital Corporation, Class A . 2,055 157,978
Federal Home Loan Mortgage Corporation ........ 4,200 197,663
Federal National Mortgage Association ......... 5,400 328,050
FINOVA Group, Inc. ............................ 5,500 311,437
MBIA, Inc. .................................... 6,100 456,737
Provident Companies, Inc. ..................... 5,700 196,650
Terra Nova (Bermuda) Holdings, Ltd. ........... 4,300 134,913
The PMI Group, Inc. ........................... 12,500 917,187
Travelers Group, Inc. ......................... 2,400 145,500
Travelers Property Casualty Corporation ....... 3,300 141,488
----------
3,147,203
</TABLE>
See notes to financial statements.
42
<PAGE> 44
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
FOOD & BEVERAGES -- (4.4%)
Anheuser-Busch Companies, Inc. ................ 10,600 $ 500,187
Corn Products International, Inc. (a) ......... 5,400 182,925
Keebler Foods Company (a) ..................... 8,600 236,500
Ralston Purina Company ........................ 1,400 163,538
Sara Lee Corporation .......................... 3,100 173,406
Unilever N.V .................................. 1,800 142,088
----------
1,398,644
HEALTH CARE -- (5.3%)
Foundation Health Systems, Inc. (a) ........... 9,020 237,903
Tenet Healthcare Corporation (a) .............. 6,000 187,500
Trigon Healthcare, Inc. (a) ................... 10,850 392,634
United Healthcare Corporation ................. 6,700 425,450
Wellpoint Health Networks, Inc. (a) ........... 6,000 444,000
----------
1,687,487
HOUSEHOLD APPLIANCES & HOME FURNISHINGS -- (0.4%)
Maytag Company ................................ 2,435 120,228
----------
HOUSEHOLD PRODUCTS -- (2.0%)
Premark International, Inc. ................... 11,500 370,875
Rubbermaid, Inc. .............................. 8,000 265,500
----------
636,375
INDUSTRIAL MANUFACTURING & PROCESSING -- (1.5%)
UNOVA, Inc. (a) ............................... 22,700 488,050
----------
INVESTMENT COMPANIES -- (0.7%)
Lehman Brothers Holdings, Inc. ................ 3,100 240,444
----------
MACHINERY & EQUIPMENT -- (0.5%)
Caterpillar, Inc. ............................. 2,800 148,050
----------
OIL & GAS -- (1.2%)
Burlington Resources, Inc. .................... 6,300 271,294
R & B Falcon Corporation (a) .................. 5,174 117,062
----------
388,356
OIL SERVICES -- (0.5%)
Noble Drilling Corporation (a) ................ 6,800 163,625
----------
PHOTOGRAPHY -- (1.8%)
Polaroid Corporation .......................... 15,900 565,444
----------
PUBLISHING SERVICES -- (0.5%)
R.R. Donnelley & Sons Company ................. 3,400 155,550
----------
REAL ESTATE -- (0.2%)
Equity Residential Properties Trust ........... 1,400 66,413
----------
RETAIL-DISCOUNT -- (1.0%)
Consolidated Stores Corporation (a) ........... 8,700 315,375
----------
</TABLE>
See notes to financial statements.
43
<PAGE> 45
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
RETAIL-SPECIALTY - (0.4%)
Proffitts, Inc. (a) ............................. 3,300 $ 133,237
-----------
RETAIL-TRADE -- (5.3%)
Federated Department Stores, Inc. (a) ........... 13,150 707,634
May Department Stores Company ................... 5,000 327,500
Neiman Marcus Group, Inc. (a) ................... 3,700 160,719
Payless Shoesource, Inc. (a) .................... 2,285 168,376
Sears, Roebuck & Company ........................ 5,300 323,631
-----------
1,687,860
TELECOMMUNICATIONS -- (6.9%)
Alltel Corporation .............................. 2,500 116,250
Ameritech Corporation ........................... 5,800 260,275
AT&T Corporation ................................ 8,000 457,000
Bell Atlantic Corporation ....................... 10,380 473,587
BellSouth Corporation ........................... 4,900 328,913
Loral Space & Communications (a) ................ 5,200 146,900
Motorola, Inc. .................................. 3,500 183,969
SBC Communications, Inc. ........................ 5,700 228,000
-----------
2,194,894
TOBACCO -- (0.9%)
Philip Morris Companies, Inc. ................... 7,700 303,188
-----------
TRANSPORTATION -- (1.1%)
Burlington Northern Santa Fe Corporation ........ 1,800 176,738
CSX Corporation ................................. 3,800 172,900
-----------
349,638
-----------
TOTAL COMMON STOCKS -- (Cost $22,934,146) .... 82.9% 26,524,987
-----------
DEPOSITARY RECEIPTS
OIL -- (4.2%)
British Petroleum Plc ........................... 9,759 861,232
Total S.A ....................................... 7,200 470,700
-----------
1,331,932
CHEMICALS -- (1.1%)
Rhone Poulenc S.A ............................... 6,350 356,791
-----------
TOTAL DEPOSITARY RECEIPTS -- (Cost $1,355,076) 5.3% 1,688,723
-----------
</TABLE>
See notes to financial statements.
44
<PAGE> 46
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C> <C>
PREFERRED STOCKS
INDUSTRIAL MACHINERY -- (0.7%)
Ingersoll Rand Ltd. ............................... 11,400 $229,425
--------
REAL ESTATE -- (0.5%)
Equity Residential Properties Trust ............... 7,100 172,175
--------
TELEPHONE -- (0.7%)
Airtouch Communications, Inc., Class B, Convertible 4,800 231,600
--------
TOTAL PREFERRED STOCKS -- (Cost $575,890) ...... 1.9% 633,200
--------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS
OIL SERVICES -- (0.7%)
Diamond Offshore Drilling, Inc.,
Convertible ............................. 3.750% 02/15/2007 $ 190,000 218,975
----------
RETAIL-TRADE -- (0.4%)
Rite Aid Corporation, Convertible (b) ...... 5.250% 09/15/2002 100,000 122,000
----------
TOTAL CORPORATE BONDS -- (Cost $350,745) 1.1% 340,975
----------
CONVERTIBLE BOND
ELECTRONICS -- (0.4%)
National Semiconductor Corporation ......... 6.500% 10/01/2002 140,000 128,580
----------
TOTAL CONVERTIBLE BOND -- (Cost $131,175) 0.4% 128,580
----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY
AMOUNT
------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (8.7%)
State Street Bank and Trust Company (c) ........... 5.750% 07/01/1998 $ 2,773,443 2,773,000
------------
TOTAL SHORT TERM INVESTMENT -- (Cost $2,773,000) 8.7% 2,773,000
------------
TOTAL INVESTMENTS -- (Cost $28,120,032) ................. 100.3% 32,089,465
OTHER ASSETS LESS LIABILITIES -- ........................ (0.3)% (110,057)
------------ ------------
NET ASSETS -- ........................................... 100.0% $ 31,979,408
============ ============
</TABLE>
(a) Non-income producing security.
(b) Pursuant to Rule 144A under the Securities Act of 1933, these
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1998, the
security was $122,000 or 0.38% of the net assets of the Portfolio.
(c) The agreement with State Street Bank & Trust Company, dated 06/30/98,
bearing 5.75% interest, to be repurchased at $2,773,443 on 07/01/98, is
fully collateralized by a United States Treasury Bond, 9.125%,
05/15/18, with a value of $2,829,816.
See notes to financial statements.
45
<PAGE> 47
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
APPAREL & TEXTILES -- (0.6%)
Westpoint Stevens, Inc. (a) ................ 6,600 $ 217,800
----------
BANKS -- (6.0%)
BankAmerica Corporation .................... 7,500 648,281
Fifth Third Bancorp ........................ 8,960 564,480
Norwest Corporation ........................ 7,000 261,625
Star Banc Corporation ...................... 3,800 242,725
State Street Corporation ................... 4,000 278,000
Zions Bancorporation ....................... 5,700 302,813
----------
2,297,924
BUSINESS SERVICES -- (0.9%)
Accustaff, Inc. (a) ........................ 11,100 346,875
----------
COMMUNICATION EQUIPMENT -- (1.9%)
Tellabs, Inc. (a) .......................... 10,000 716,250
----------
COMPUTER RELATED -- (5.7%)
Cisco Systems, Inc. (a) .................... 10,500 966,656
Compaq Computer Corporation ................ 9,600 272,400
Dell Computer Corporation (a) .............. 2,900 269,156
EMC Corporation (a) ........................ 15,100 676,669
----------
2,184,881
COMPUTER SOFTWARE -- (10.2%)
America Online, Inc. ....................... 2,600 275,600
BMC Software, Inc. (a) ..................... 21,160 1,098,997
Computer Associates International, Inc. .... 7,450 413,941
Compuware Corporation (a) .................. 10,000 511,250
HBO & Company .............................. 8,000 282,000
Microsoft Corporation (a) .................. 8,960 971,040
Parametric Technology Corporation (a) ...... 6,000 162,750
Peoplesoft, Inc. (a) ....................... 4,400 206,800
----------
3,922,378
COSMETICS & TOILETRIES -- (2.4%)
CVS Corporation ............................ 3,818 148,663
Gillette Company ........................... 11,040 625,830
Walgreen Company ........................... 4,000 165,250
----------
939,743
DRUGS -- (8.7%)
Eli Lilly & Company ........................ 8,000 528,500
Merck & Company, Inc. ...................... 2,300 307,625
Pfizer, Inc. ............................... 9,420 1,023,836
Schering Plough Corporation ................ 7,900 723,837
Warner Lambert Company ..................... 7,500 520,313
Watson Pharmaceuticals, Inc. (a) ........... 5,600 261,450
----------
3,365,561
</TABLE>
See notes to financial statements.
46
<PAGE> 48
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
DRUGS/PHARMACEUTICALS -- (0.0%)
Crescendo Pharmaceuticals Corporation (a) .. 182 $ 2,306
----------
ELECTRIC POWER -- (1.6%)
AES Corporation (a) ........................ 11,600 609,725
----------
ELECTRICAL EQUIPMENT -- (1.2%)
General Electric Company ................... 5,000 455,000
----------
ENVIRONMENTAL -- (1.3%)
Allied Waste Industries, Inc. (a) .......... 6,000 144,000
Thermo Electron Corporation (a) ............ 3,150 107,691
Tyco International, Ltd. ................... 4,000 252,000
----------
503,691
EXPLORATION & DRILLING -- (1.6%)
Smith International, Inc. (a) .............. 5,000 174,063
Transocean Offshore, Inc. .................. 9,800 436,100
----------
610,163
FINANCIAL SERVICES -- (4.1%)
Federal National Mortgage Association ...... 3,600 218,700
FINOVA Group, Inc. ......................... 12,220 691,957
Paychex Inc. ............................... 2,800 113,750
Sunamerica, Inc. ........................... 9,800 562,888
----------
1,587,295
FOOD RETAILERS -- (1.2%)
Safeway, Inc. (a) .......................... 11,000 447,563
----------
INSURANCE -- (6.2%)
Allstate Corporation ....................... 4,300 393,719
American International Group, Inc. ......... 4,690 684,740
Conseco, Inc. .............................. 3,400 158,950
Progressive Corporation .................... 2,000 282,000
Travelers, Inc. ............................ 14,580 883,912
----------
2,403,321
LEISURE & ENTERTAINMENT -- (0.4%)
Carnival Corporation ....................... 3,600 142,650
----------
MACHINERY & EQUIPMENT -- (0.3%)
Applied Power, Inc. ........................ 3,200 110,000
----------
MEDIA -- (1.7%)
Clear Channel Communications (a) ........... 4,800 523,800
Tele Communications, Inc. (a) .............. 3,300 126,844
----------
650,644
</TABLE>
See notes to financial statements.
47
<PAGE> 49
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
MEDICAL PRODUCTS & SUPPLIES -- (2.5%)
Guidant Corporation ........................ 6,200 $ 442,137
Medtronic, Inc. ............................ 5,600 357,000
Sofamor Danek Group, Inc. (a) .............. 2,000 173,125
----------
972,262
MEDICAL SUPPLIES & SERVICES -- (2.7%)
Cardinal Health, Inc. ...................... 5,810 544,687
Health Management Associates, Inc. (a) ..... 8,200 274,188
Lincare Holdings, Inc. (a) ................. 3,200 134,600
Quintiles Transnational Corporation (a) .... 1,900 93,456
----------
1,046,931
OIL SERVICES -- (1.7%)
Baker Hughes, Inc. ......................... 9,300 321,431
Petroleum Geo-Services (a) ................. 6,400 195,200
Schlumberger, Ltd. ......................... 2,000 136,625
----------
653,256
PRINTING & PUBLISHING -- (3.1%)
Omnicom Group .............................. 17,500 872,812
The New York Times Company ................. 4,000 317,000
----------
1,189,812
RETAIL -- (2.0%)
Dayton Hudson Corporation .................. 11,600 562,600
Dollar Tree Stores, Inc. (a) ............... 4,800 195,000
----------
757,600
RETAIL-DISCOUNT -- (1.3%)
Consolidated Stores Corporation (a) ........ 3,118 113,028
Dollar General Corporation ................. 6,000 229,536
TJX Companies, Inc. ........................ 6,000 144,750
----------
487,314
RETAIL-SPECIALTY -- (4.7%)
Bed Bath & Beyond, Inc. (a) ................ 4,600 238,338
Costco Companies, Inc. (a) ................. 11,093 699,552
Gap, Inc. .................................. 4,400 271,150
Home Depot, Inc. ........................... 3,400 282,412
Staples, Inc. (a) .......................... 7,200 208,350
United Stationers, Inc. (a) ................ 1,900 123,025
----------
1,822,827
SAVINGS & LOANS -- (0.7%)
H.F. Ahmanson & Company .................... 4,000 284,000
----------
TELECOMMUNICATIONS-CELLULAR/WIRELESS -- (1.1%)
AirTouch Communications, Inc. (a) .......... 7,000 409,063
----------
</TABLE>
See notes to financial statements.
48
<PAGE> 50
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C> <C>
COMMON STOCKS
TELECOMMUNICATIONS-LONG DISTANCE -- (0.9%)
Worldcom, Inc. ............................. 7,600 $368,125
----------
TRUCKING & SHIPPING -- (0.6%)
Airbourne Freight Corporation .............. 7,000 244,563
----------
TOTAL COMMON STOCKS -- (Cost $19,161,182) 77.3% 29,749,523
----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT
<S> <C> <C> <C> <C> <C>
GOVERNMENT AND AGENCY SECURITIES
FEDERAL AGENCIES -- (4.7%)
Federal Home Loan Mortgage
Corporation ............................ 5.990% 12/01/2003 $ 1,500,000 1,517,805
Government National Mortgage
Association ............................ 6.000% 11/15/2008 94,067 93,979
...................... 6.500% 10/15/2008 94,024 95,145
...................... 7.000% 10/15/2008 100,507 103,082
-------------
1,810,011
U.S. GOVERNMENT SECURITIES -- (12.6%)
United States Treasury Bond ............... 7.250% 08/15/2022 1,000,000 1,196,560
United States Treasury Notes .............. 5.875% 11/15/2005 1,500,000 1,528,590
....... 6.375% 08/15/2002 500,000 515,310
....... 6.500% 05/31/2001 500,000 512,810
....... 6.875% 05/15/2006 1,000,000 1,082,810
-------------
4,836,080
TOTAL GOVERNMENT AND AGENCY SECURITIES -- (Cost $6,336,402) 17.3% 6,646,091
-------------
CORPORATE BOND
INDUSTRIALS -- (0.7%)
BP America, Inc. ........................... 8.500% 04/15/2001 250,000 266,110
-------------
TOTAL CORPORATE BOND -- (Cost $251,394) ................... 0.7% 266,110
-------------
CONVERTIBLE BOND
MEDICAL SUPPLIES & SERVICES -- (0.8%)
Alza Corporation .......................... 5.000% 05/01/2006 250,000 324,688
-------------
TOTAL CONVERTIBLE BOND -- (Cost $239,679) ................. 0.8% 324,688
-------------
</TABLE>
See notes to financial statements.
49
<PAGE> 51
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (3.6%)
State Street Bank and Trust Company (b) ........... 4.500% 07/01/1998 $ 1,377,172 $ 1,377,000
-----------
TOTAL SHORT TERM INVESTMENT -- (Cost $1,377,000) 3.6% 1,377,000
-----------
TOTAL INVESTMENTS -- (Cost $27,365,657) ................. 99.7% 38,363,412
OTHER ASSETS LESS LIABILITIES -- ........................ 0.3% 106,133
----------- -----------
NET ASSETS -- ........................................... 100.0% $38,469,545
=========== ===========
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 06/30/98,
bearing 4.50% interest to be repurchased at $1,377,172 on 07/01/98 is
fully collateralized by a United States Treasury Bond, 9.125%,
05/15/18, with a value of $1,411,397.
See notes to financial statements.
50
<PAGE> 52
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
AEROSPACE & DEFENSE -- (0.5%)
Tracor, Inc. .............................. 8.500% 03/01/2007 $ 100,000 $ 109,000
-------------
AUTOMOTIVE -- (2.1%)
Aftermarket Technology Company ............ 12.000% 08/01/2004 56,000 62,020
Collins & Aikman Products Company ......... 11.500% 04/15/2006 200,000 223,750
Lear Corporation .......................... 9.500% 07/15/2006 100,000 109,500
Oshkosh Truck Corporation ................. 8.750% 03/01/2008 50,000 50,750
-------------
446,020
BANKING -- (1.4%)
First Nationwide Escrow Corporation, Inc. . 10.625% 10/01/2003 175,000 197,312
First Nationwide Holdings, Inc. ........... 9.125% 01/15/2003 100,000 104,250
-------------
301,562
BEVERAGE & TOBACCO -- (0.5%)
Dimon, Inc. ............................... 8.875% 06/01/2006 100,000 100,000
-------------
BROADCAST RADIO & TELEVISION -- (7.0%)
Acme Television LLC (a) ................... 9.930% 09/30/2004 100,000 83,000
Big City Radio, Inc. (a),(b) .............. 10.897% 03/15/2005 100,000 76,000
Capstar Radio Broadcasting Partners, Inc. . 9.250% 07/01/2007 50,000 52,625
Chancellor Media Corporation .............. 8.125% 12/15/2007 200,000 203,000
............ 8.750% 06/15/2007 125,000 130,625
............ 10.500% 01/15/2007 100,000 111,000
Cumulus Media, Inc. ....................... 10.375% 07/01/2008 50,000 50,750
Fox/Liberty Networks LLC .................. 8.875% 08/15/2007 50,000 51,125
(a) .............. 9.493% 08/15/2007 225,000 155,250
Outdoor Systems, Inc. ..................... 8.875% 06/15/2007 200,000 209,000
Sinclair Broadcast Group, Inc. ............ 8.750% 12/15/2007 200,000 207,000
Sullivan Broadcasting Holdings, Inc. ...... 10.250% 12/15/2005 100,000 114,486
Young Broadcasting, Inc. .................. 9.000% 01/15/2006 50,000 52,875
-------------
1,496,736
BUILDING & DEVELOPMENT -- (0.9%)
American Architectural Product ............ 11.950% 12/01/2007 50,000 51,750
American Builders & Contractors
Supply Company ......................... 10.625% 05/15/2007 50,000 50,250
Building Materials Corporation of
America ................................ 8.000% 10/15/2007 50,000 50,500
............................ 8.625% 12/15/2006 50,000 52,000
-------------
204,500
BUSINESS EQUIPMENT & SERVICES -- (2.3%)
Dialog Corporation ........................ 11.000% 11/15/2007 125,000 137,500
Electronic Retailing Systems International,
Inc. (a) ............................... 27.485% 02/01/2004 50,000 22,250
Fisher Scientific International, Inc. ..... 9.000% 02/01/2008 100,000 100,000
U.S. Office Products Company (b) .......... 9.750% 06/15/2008 125,000 126,406
United Stationers Supply Company (b) ...... 8.375% 04/15/2008 50,000 50,250
.. 12.750% 05/01/2005 50,000 57,250
-------------
493,656
</TABLE>
See notes to financial statements.
51
<PAGE> 53
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
CABLE TELEVISION -- (11.2%)
Charter Communications Holdings, Inc.,
LP (a) ............................ 11.385% 03/15/2007 $ 150,000 $ 123,750
Charter Communications Southeast, LP . 11.250% 03/15/2006 50,000 55,750
Comcast Corporation .................. 9.375% 05/15/2005 150,000 160,875
.............. 10.625% 07/15/2012 50,000 64,000
CSC Industries, Inc. ................. 7.875% 12/15/2007 100,000 106,000
............... 9.250% 11/01/2005 25,000 26,875
............... 9.875% 02/15/2013 150,000 166,125
Diamond Holdings Plc ................. 9.125% 02/01/2008 125,000 131,250
Diva Systems Corporation (a),(b) ..... 14.828% 03/01/2008 75,000 35,625
Echostar Satellite Broadcasting
Corporation (a) ................... 10.186% 03/15/2004 200,000 185,000
International CableTel, Inc. (a) ..... 7.616% 04/15/2005 125,000 110,625
(a) ...... 10.218% 10/15/2003 125,000 124,687
Lenfest Communications, Inc. (b) ..... 8.250% 02/15/2008 150,000 156,375
NTL, Inc. (a),(b) .................... 9.420% 04/01/2008 275,000 180,125
Pegasus Media & Communications, Inc. . 12.500% 07/01/2005 50,000 56,750
Rogers Cablesystems Ltd. ............. 10.000% 12/01/2007 150,000 167,250
TeleWest Plc (a) ..................... 10.235% 10/01/2007 475,000 394,250
UIH Australia / Pacific, Inc. (a) .... 15.880% 05/15/2006 125,000 75,625
United International Holdings, Inc. .. 10.750% 02/15/2008 150,000 93,750
-------------
2,414,687
CHEMICALS & PLASTICS -- (2.4%)
Buckeye Cellulose Corporation ........ 9.250% 09/15/2008 125,000 131,250
ISP Holdings, Inc. ................... 9.750% 02/15/2002 100,000 105,500
Polymer Group, Inc. (b) .............. 8.750% 03/01/2008 50,000 50,125
.......... 9.000% 07/01/2007 175,000 178,500
Sterling Chemicals, Inc. (a) ......... 15.528% 08/15/2008 75,000 43,125
-------------
508,500
CLOTHING & TEXTILES -- (1.9%)
Collins & Aikman Floorcoverings, Inc. 10.000% 01/15/2007 75,000 79,125
GFSI, Inc. ........................... 9.625% 03/01/2007 50,000 52,250
Glenoit Corporation .................. 11.000% 04/15/2007 100,000 107,500
Pillowtex Corporation ................ 9.000% 12/15/2007 50,000 51,625
.............. 10.000% 11/15/2006 100,000 107,500
-------------
398,000
CONGLOMERATES -- (0.6%)
Eagle-Picher Industries, Inc. (b) .... 9.375% 03/01/2008 125,000 126,875
-------------
</TABLE>
See notes to financial statements.
52
<PAGE> 54
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
CONSUMER PRODUCTS -- (5.0%)
American Safety Razor Company .......... 9.875% 08/01/2005 $ 50,000 $ 53,375
Amscan Holdings, Inc. .................. 9.875% 12/15/2007 100,000 101,500
Boyds Collection Ltd. (b) .............. 9.000% 05/15/2008 50,000 50,125
Chattem, Inc. (b) ...................... 8.875% 04/01/2008 75,000 74,437
Diamond Brands Operating Corporation (b) 10.125% 04/15/2008 50,000 50,250
Hosiery Corporation of America, Inc. ... 13.750% 08/01/2002 50,000 55,250
ICON Fitness Corporation ............... 13.000% 07/15/2002 50,000 50,250
(a) ............ 14.000% 11/15/2006 100,000 30,500
Playtex Family Products Corporation .... 8.875% 07/15/2004 100,000 103,000
.. 9.000% 12/15/2003 100,000 103,000
Revlon Corporation ..................... 8.625% 02/01/2008 275,000 276,375
Sealy Corporation (b) .................. 9.875% 12/15/2007 50,000 51,250
Simmons Company ........................ 10.750% 04/15/2006 75,000 80,625
-------------
1,079,937
CONTAINER & GLASS PRODUCTS -- (0.5%)
Tekni Plex, Inc. ....................... 9.250% 03/01/2008 100,000 100,500
-------------
ECOLOGICAL SERVICES & EQUIPMENT -- (1.4%)
Allied Waste Industries, Inc. (a) ...... 9.636% 06/01/2007 175,000 129,063
Allied Waste North America, Inc. ....... 10.250% 12/01/2006 150,000 165,187
-------------
294,250
ELECTRONICS -- (0.6%)
Telecommunications Tech Company
LLC (b) ............................. 9.750% 05/15/2008 125,000 128,438
-------------
FOOD & DRUG RETAILERS -- (1.0%)
Carr Gottstein Foods Company ........... 12.000% 11/15/2005 50,000 56,000
Di Giorgio Corporation ................. 10.000% 06/15/2007 50,000 49,875
Jitney Jungle Stores America, Inc. ..... 10.375% 09/15/2007 100,000 107,250
-------------
213,125
FOOD PRODUCTS -- (2.2%)
Aurora Foods, Inc. ..................... 9.875% 02/15/2007 50,000 53,250
Curtice-Burns Foods, Inc. .............. 12.250% 02/01/2005 50,000 55,125
Eagle Family Foods, Inc. (b) ........... 8.750% 01/15/2008 150,000 147,000
International Home Foods, Inc. ......... 10.375% 11/01/2006 150,000 164,250
Van de Kamp's, Inc. .................... 12.000% 09/15/2005 50,000 57,500
-------------
477,125
FOOD SERVICES -- (1.2%)
Ameriserve Food Distribution, Inc. ..... 10.125% 07/15/2007 250,000 258,438
-------------
FOREST PRODUCTS -- (1.5%)
Four M Corporation ..................... 12.000% 06/01/2006 75,000 80,625
S.D. Warren Company .................... 12.000% 12/15/2004 75,000 83,438
Stone Container Corporation ............ 11.500% 10/01/2004 75,000 80,812
.......... 12.580% 08/01/2016 75,000 84,000
-------------
328,875
</TABLE>
See notes to financial statements.
53
<PAGE> 55
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
HEALTH CARE -- (3.9%)
Alliance Imaging, Inc. ................... 9.625% 12/15/2005 $ 50,000 $ 50,750
Conmed Corporation ....................... 9.000% 03/15/2008 100,000 100,000
Dade International, Inc. ................. 11.125% 05/01/2006 150,000 169,500
Hudson Respiratory Care, Inc. (b) ........ 9.125% 04/15/2008 100,000 95,500
Tenet Healthcare Corporation ............. 8.000% 01/15/2005 300,000 308,847
......... 8.625% 01/15/2007 100,000 103,750
-------------
828,347
HOME PRODUCTS -- (0.2%)
Werner Holding Delaware, Inc. ............ 10.000% 11/15/2007 50,000 52,250
-------------
HOTELS, MOTELS, INNS & CASINOS -- (0.3%)
Courtyard by Marriott II LP .............. 10.750% 02/01/2008 50,000 55,125
-------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- (5.2%)
Amphenol Corporation ..................... 9.875% 05/15/2007 100,000 105,750
Cabot Safety Acquisition Corporation ..... 12.500% 07/15/2005 100,000 112,750
Continental Global Group, Inc. ........... 11.000% 04/01/2007 100,000 104,500
Euramax International Plc ................ 11.250% 10/01/2006 75,000 81,375
Grove Worldwide LLC (b) .................. 9.250% 05/01/2008 50,000 49,750
Hawk Corporation ......................... 10.250% 12/01/2003 32,000 34,880
International Utility Structures, Inc. (b) 10.750% 02/01/2008 50,000
51,250
Johnstown America Industries, Inc. ....... 11.750% 08/15/2005 75,000 83,437
JTM Industries, Inc. (b) ................. 10.000% 04/15/2008 100,000 102,000
MMI Products, Inc. ....................... 11.250% 04/15/2007 100,000 110,000
Neenah Corporation ....................... 11.125% 05/01/2007 50,000 54,750
Unifrax Investment Corporation ........... 10.500% 11/01/2003 50,000 52,500
Wesco Distribution, Inc. (b) ............. 9.125% 06/01/2008 150,000 149,250
Wesco International, Inc. (a),(b) ........ 11.087% 06/01/2008 50,000 29,500
-------------
1,121,692
LEISURE & ENTERTAINMENT -- (5.4%)
AMF Group, Inc. (a) ...................... 10.592% 03/15/2006 122,000 98,210
Premier Parks, Inc. (a) .................. 9.265% 04/01/2008 250,000 167,500
.............. 12.000% 08/15/2003 50,000 55,625
Regal Cinemas, Inc. (b) .................. 9.500% 06/01/2008 125,000 126,875
Six Flags Theme Parks, Inc. (a) .......... 9.451% 06/15/2005 175,000 199,500
Viacom, Inc. ............................. 8.000% 07/07/2006 500,000 518,125
-------------
1,165,835
MACHINERY & EQUIPMENT -- (1.2%)
Alvey Systems, Inc. ...................... 11.375% 01/31/2003 75,000 81,563
Clark Material Handling Corporation ...... 10.750% 11/15/2006 75,000 79,875
National Equipment Services, Inc. (b) .... 10.000% 11/30/2004 50,000 50,750
Tokheim Corporation ...................... 11.500% 08/01/2006 46,000 53,130
-------------
265,318
</TABLE>
See notes to financial statements.
54
<PAGE> 56
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
OIL & GAS -- (2.9%)
Dailey International, Inc. ................ 9.500% 02/15/2008 $ 100,000 $ 98,500
Forcenergy Gas Exploration, Inc. .......... 8.500% 02/15/2007 50,000 47,500
.......... 9.500% 11/01/2006 150,000 151,500
Ocean Energy, Inc. ........................ 10.375% 10/15/2005 75,000 82,875
Pride Petroleum Services, Inc. ............ 9.375% 05/01/2007 150,000 158,625
Universal Compression (a),(b) ............. 9.995% 02/15/2008 125,000 79,375
-----------
618,375
PRINTING & PUBLISHING -- (1.5%)
Affiliated Newspaper Investments, Inc. (a) 11.399% 07/01/2006 250,000 243,750
Hollinger International Publishing, Inc. .. 9.250% 03/15/2007 75,000 78,750
-----------
322,500
RETAILERS -- (0.6%)
Brylane Capital Corporation ............... 10.000% 09/01/2003 75,000 79,313
Leslies Poolmart, Inc. .................... 10.375% 07/15/2004 50,000 52,750
-----------
132,063
SERVICES -- (0.7%)
Coinmach Corporation ...................... 11.750% 11/15/2005 50,000 56,000
Sitel Corporation (b) ..................... 9.250% 03/15/2006 100,000 97,500
-----------
153,500
STEEL -- (0.8%)
GS Technologies Operating Company, Inc. ... 12.000% 09/01/2004 150,000 163,125
-----------
SURFACE TRANSPORTATION -- (3.2%)
Chemical Leaman Corporation ............... 10.375% 06/15/2005 50,000 53,125
Gearbulk Holdings Ltd. .................... 11.250% 12/01/2004 150,000 164,625
Holt Group, Inc. (b) ...................... 9.750% 01/15/2006 75,000 73,875
Statia Terminals International N.V ........ 11.750% 11/15/2003 100,000 105,500
Stena AB .................................. 8.750% 06/15/2007 50,000 50,250
................................ 10.500% 12/15/2005 175,000 191,187
................................ 10.625% 06/01/2008 50,000 50,875
-----------
689,437
TELECOMMUNICATIONS -- (8.8%)
Call-Net Enterprises, Inc. (a) ............ 8.981% 08/15/2007 225,000 158,625
E. Spire Communications, Inc. ............. 2.814% 11/01/2005 50,000 40,750
.......... 13.750% 07/15/2007 50,000 57,375
Esprit Telecommunication Group Plc ........ 11.500% 12/15/2007 50,000 51,688
Hermes Europe Railtel B.V ................. 11.500% 08/15/2007 100,000 112,500
Highwaymaster Communications .............. 13.750% 09/15/2005 50,000 37,500
ICG Services, Inc. (a),(b) ................ 10.723% 05/01/2008 125,000 73,125
IXC Communications, Inc. (b) .............. 9.000% 04/15/2008 50,000 50,375
Level 3 Communications, Inc. (b) .......... 9.125% 05/01/2008 400,000 392,000
Metronet Communications
Corporation (a),(b) ................... 9.858% 06/15/2008 150,000 93,562
................. 12.000% 08/15/2007 100,000 113,000
Pathnet, Inc. (b) ......................... 12.250% 04/15/2008 100,000 106,500
</TABLE>
See notes to financial statements.
55
<PAGE> 57
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
<S> <C> <C> <C> <C>
CORPORATE BONDS
TELECOMMUNICATIONS -- (CONTINUED)
PSInet, Inc. ................................. 10.000% 02/15/2005 $ 50,000 $ 51,375
Qwest Communications International,
Inc. (a) .................................. 8.106% 10/15/2007 175,000 131,469
................................ 10.875% 04/01/2007 100,000 115,500
Teligent, Inc. ............................... 11.500% 12/01/2007 150,000 151,875
United States Xchange LLC (b) ................ 15.000% 07/01/2008 50,000 51,625
Viatel, Inc. (b) ............................. 11.250% 04/15/2008 75,000 79,125
(a),(b) .............................. 11.363% 04/15/2008 50,000 30,750
-------------
1,898,719
TELECOMMUNICATIONS & CELLULAR -- (10.1%)
American Cellular Corporation (b) ............ 10.500% 05/15/2008 125,000 125,313
Intermedia Communications of Florida,
Inc. (b) .................................. 8.600% 06/01/2008 75,000 76,312
(a) .................................. 9.506% 07/15/2007 125,000 91,875
(a) .................................. 10.087% 05/15/2006 200,000 165,000
McLeodUSA, Inc. (b) .......................... 8.375% 03/15/2008 50,000 50,125
........................ 9.250% 07/15/2007 50,000 52,125
(a) ....................... 9.323% 03/01/2007 150,000 112,500
Millicom International Cellular S.A. (a) ..... 11.483% 06/01/2006 200,000 155,500
NEXTEL Communications, Inc. (a),(b) .......... 9.771% 04/15/2008 75,000 44,062
(a) ...... 9.971% 09/15/2007 50,000 34,125
(a),(b) ..... 11.756% 02/15/2008 425,000 275,719
Nextlink Communications, Inc. (b) ............ 9.000% 03/15/2008 75,000 75,000
(b) .......... 9.450% 04/15/2008 50,000 30,875
......... 9.625% 10/01/2007 50,000 51,250
Paging Network, Inc. ......................... 10.000% 10/15/2008 200,000 208,750
Rogers Cantel Mobile Communications, Inc. .... 8.800% 10/01/2007 150,000 149,438
Sygnet Wireless, Inc. ........................ 11.500% 10/01/2006 50,000 55,000
Telesystem International Wireless, Inc. (a) .. 11.425% 11/01/2007 50,000 29,875
(a) ... 11.898% 06/30/2007 200,000 132,500
USA Mobile Communications, Inc. .............. 9.500% 02/01/2004 125,000 114,375
Vanguard Cellular Systems, Inc. .............. 9.375% 04/15/2006 125,000 131,875
-------------
2,161,594
UTILITIES -- (0.4%)
El Paso Electric Company ..................... 9.400% 05/01/2011 50,000 57,792
Niagara Mohawk Power Corporation (a) ......... 8.016% 07/01/2010 50,000 34,608
-------------
92,400
-------------
TOTAL CORPORATE BONDS -- (Cost $18,215,027) 89.4% 19,200,504
-------------
</TABLE>
See notes to financial statements.
56
<PAGE> 58
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
<S> <C> <C>
PREFERRED STOCKS
BANKING -- (0.1%)
California Federal Preferred Capital Corporation, 9.125% 1,000 $ 27,313
BROADCAST RADIO & TELEVISION -- (2.8%)
Benedek Communications Corporation, 11.50% (b),(c) ...... 75 75,750
Capstar Broadcasting Partners, Inc., Sr., 12.00% ........ 564 63,864
CBS Radio, Inc., Exch., 11.375% ......................... 940 109,275
Chancellor Media Corporation, PIK,12.25% (c) ............ 500 72,000
Cumulus Media, Inc., Sr., 13.75% (c) .................... 50 51,250
SFX Broadcasting, Inc., Exch., Series E, 12.625% ........ 1,063 127,043
Sinclair Broadcast Group, Inc., 11.625% ................. 800 87,600
----------
586,782
CABLE TELEVISION -- (0.7%)
Pegasus Communications Corporation, PIK, Series A, 12.75% 137 155,063
----------
FOOD SERVICES -- (0.1%)
Nebco Evans Holding Company, Exch., 11.25% (c) .......... 256 26,176
----------
INDUSTRIAL PRODUCTS & EQUIPMENT -- (0.4%)
Fairfield Manufacturing Company, Inc., Exch., 11.25% (c) 75 81,375
----------
PRINTING & PUBLISHING -- (1.3%)
Primedia, Inc., Exch., Series D, 10.00% ................. 750 78,375
Primedia, Inc., Exch., Series E, 9.20% (c) .............. 1,850 189,625
----------
268,000
TELECOMMUNICATIONS & CELLULAR -- (0.4%)
NEXTEL Communications, Inc., 11.125% (b) ................ 25 25,875
NEXTEL Communications, Inc., 13.00% ..................... 53 59,625
----------
85,500
UTILITIES -- (0.3%)
El Paso Electric Company, PIK, Series A, 11.40% ......... 640 70,690
----------
TOTAL PREFERRED STOCKS -- (Cost $1,139,578) .......... 6.1% 1,300,899
----------
COMMON STOCKS
CABLE TELEVISION -- (0.0%)
CS Wireless Systems, Inc. (c) ........................... 13 0
Pegasus Communications Corporation (c) .................. 112 2,352
----------
2,352
CONSUMER PRODUCTS -- (0.0%)
Hosiery Corporation of America, Inc. .................... 50 250
----------
PRINTING & PUBLISHING -- (0.2%)
Affiliated Newspaper Investments, Inc. (c) .............. 250 30,000
----------
TOTAL COMMON STOCKS -- (Cost $349) ................... 0.2% 32,602
----------
</TABLE>
See notes to financial statements.
57
<PAGE> 59
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
WARRANTS
BUSINESS EQUIPMENT & SERVICES -- (0.0%)
Electronic Retailing Systems International, Inc. (b),(c) 50 $ 500
-------
CABLE TELEVISION -- (0.0%)
Australis Holdings Property Ltd. (c) ................... 50 0
Pegasus Communications Corporation (c) ................. 75 2,475
UIH Australia/Pacific, Inc. (c) ........................ 125 0
Wireless One, Inc. (c) ................................. 150 0
-------
2,475
CONSUMER PRODUCTS -- (0.0%)
IHF Capital, Inc. (c) .................................. 100 500
-------
ECOLOGICAL SERVICES & EQUIPMENT -- (0.0%)
ICF Kaiser International, Inc. (c) ..................... 240 60
-------
STEEL -- (0.0%)
Bar Technologies, Inc. (c) ............................. 25 1,375
-------
TELECOMMUNICATIONS -- (0.1%)
Highway Master Communications (c) ...................... 50 125
Metronet Communications Corporation (b),(c) ............ 100 4,763
-------
4,888
TELECOMMUNICATIONS & CELLULAR -- (0.0%)
Cellular Communications International, Inc. (c) ........ 100 4,000
NEXTEL Communications, Inc. (c) ........................ 100 240
-------
4,240
-------
TOTAL WARRANTS -- (Cost $1,558) ..................... 0.1% 14,038
-------
</TABLE>
See notes to financial statements.
58
<PAGE> 60
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (3.1%)
State Street Bank and Trust Company (d) ..............4.500% 07/01/1998 $ 673,084 $ 673,000
-----------
TOTAL SHORT TERM INVESTMENT -- (Cost $673,000) 3.1% 673,000
-----------
TOTAL INVESTMENTS -- (Cost $20,029,512) 98.9% 21,221,043
OTHER ASSETS LESS LIABILITIES -- 1.1% 245,650
------ -----------
NET ASSETS -- 100.0% $21,466,693
======= ===========
</TABLE>
(a) Step bond. Interest rate shown represents yield to maturity.
(b) Pursuant to Rule 144A under the Securities Act of 1933, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 1998, these securities
aggregated $3,870,262 or 18.03% of the net assets of the Portfolio.
(c) Non-income producing security.
(d) The agreement with State Street Bank & Trust Company, dated 6/30/98,
bearing 4.50% interest, to be repurchased at $673,084 on 7/1/98 is fully
collateralized by a United States Treasury Bond, 9.125%, 05/15/18, with a
value of $688,144.
See notes to financial statements.
59
<PAGE> 61
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
GOVERNMENT AND AGENCY SECURITIES
MORTGAGE BACKED SECURITIES -- (43.6%)
<S> <C> <C> <C> <C>
FHA Insured Project Loan ..................3.025% 11/01/2006 $ 360,507 $ 322,987
..................7.500% 11/15/2030 271,372 279,174
FHLMC Participation Certificates (a) ......8.236% 08/01/2025 185,356 191,814
......8.500% 01/01/2003 104,507 107,970
......9.000% 06/01/2016 134,708 144,773
......9.500% 04/01/2007 78,315 82,031
.....10.000% 10/01/2005 76,680 81,088
FNMA Guaranteed Real Estate
Mortgage Investment Pass-Thru
Certificates ...........................6.000% 09/01/2012 171,429 169,819
(a)...........................6.218% 11/01/2035 448,027 451,279
...........................6.740% 08/25/2007 300,000 314,087
(a)...........................6.884% 04/01/2020 118,300 119,315
(a)...........................7.299% 08/17/2018 235,000 250,863
...........................7.778% 07/01/2001 225,000 235,240
...........................9.500% 03/25/2019 476,145 534,919
..........................10.000% 04/01/2020 99,301 108,503
GNMA Guaranteed Pass-Thru
Certificates (a) .......................6.875% 03/20/2018 252,533 258,991
.......................7.500% 04/15/2024 211,437 217,451
.......................9.000% 01/15/2008 214,782 223,171
.......................9.000% 12/15/2006 153,101 161,269
--------------
4,254,744
U.S. GOVERNMENT SECURITIES -- (40.2%)
U.S. Treasury Bonds .......................6.125% 11/15/2027 760,000 814,626
.......................6.875% 08/15/2025 185,000 214,369
.......................7.500% 11/15/2024 115,000 142,672
......................11.625% 11/15/2004 315,000 416,391
U.S. Treasury Notes .......................5.750% 08/15/2003 205,000 207,242
.......................5.875% 11/30/2001 110,000 111,134
.......................6.000% 08/15/2000 600,000 605,813
.......................6.250% 08/31/2002 500,000 513,126
.......................6.500% 04/30/1999 150,000 151,219
.......................6.625% 06/30/2001 240,000 247,050
.......................6.875% 07/31/1999 245,000 248,445
.......................8.000% 08/15/1999 240,000 246,450
--------------
3,918,537
--------------
TOTAL GOVERNMENT AND AGENCY SECURITIES -- (Cost $7,989,311) 83.8% 8,173,281
--------------
</TABLE>
See notes to financial statements.
60
<PAGE> 62
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
CORPORATE BONDS
ENTERTAINMENT -- (3.4%)
<S> <C> <C> <C> <C> <C>
Time Warner, Inc. ........................................8.110% 08/15/2006 $ 300,000 $ 330,727
--------------
FINANCIAL SERVICES -- (2.7%)
Simon Debartolo Group LP .................................6.750% 06/15/2005 260,000 258,718
--------------
TOTAL CORPORATE BOND -- (Cost $588,213) 6.1% 589,445
--------------
MUNICIPAL BOND -- (1.2%)
New Jersey Economic Development
Authority ............................................7.425% 02/15/2029 100,000 113,022
--------------
TOTAL MUNICIPAL BOND -- (Cost $100,000) 1.2% 113,022
--------------
NON-AGENCY MORTGAGES AND
ASSET BACKED -- (2.8%)
Community Program Loan ..................................4.500% 04/01/2029 340,000 274,550
--------------
TOTAL NON-AGENCY MORTGAGES AND
ASSET BACKED -- (Cost $254,044) 2.8% 274,550
--------------
MATURITY
AMOUNT
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (6.5%)
State Street Bank and Trust Company (b) .................5.000% 07/01/1998 637,088 637,000
--------------
TOTAL SHORT TERM INVESTMENT -- (Cost $637,000) 6.5% 637,000
--------------
TOTAL INVESTMENTS -- (Cost $9,568,568) 100.4% 9,787,298
OTHER ASSETS LESS LIABILITIES -- (0.4)% (34,364)
------ --------------
NET ASSETS -- 100.0% $ 9,752,934
====== ==============
</TABLE>
(a) Variable rate instrument. Interest rate is the rate in effect at June 30,
1998.
(b) The agreement with State Street Bank & Trust Company, dated 6/30/98,
bearing 5.00% interest, to be repurchased at $637,088 on 7/1/98 is fully
collateralized by a United States Treasury Bond, 9.125%, 05/15/18, with a
value of $653,034.
See notes to financial statements.
61
<PAGE> 63
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SMALL CAP WORLD
GROWTH EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Investments - securities, at value...................... $ 15,359,626 $ 26,104,214 $ 70,392,132
Investments - repurchase agreements..................... 334,000 0 2,214,000
Foreign currency holdings, at value (cost $15,111)...... 0 15,315 0
Cash.................................................... 212 1,022 562
Income receivable....................................... 300 30,424 30,072
Receivable for securities sold.......................... 29,379 149,509 1,309,427
Unrealized appreciation on forward currency
contracts.......................................... 0 197,813 0
Receivable for trust shares sold........................ 19,859 0 20,657
Prepaid expenses........................................ 2,056 2,941 6,887
Foreign income tax reclaim receivable................... 0 24,759 0
Due from adviser........................................ 5,304 3,205 0
-------------- -------------- --------------
TOTAL ASSETS........................................ 15,750,736 26,529,202 73,973,737
LIABILITIES
Payable for securities purchased........................ 64,964 207,801 1,092,489
Unrealized depreciation on forward currency
contracts.......................................... 0 46,961 0
Advisory fee payable.................................... 10,578 14,664 40,381
Accounts payable and accrued expenses................... 66,140 47,847 58,381
Payable for trust shares redeemed....................... 23,946 116,706 102,494
-------------- -------------- --------------
TOTAL LIABILITIES................................... 165,628 433,979 1,293,745
-------------- -------------- --------------
TOTAL NET ASSETS.................................... $ 15,585,108 $ 26,095,223 $ 72,679,992
============== ============== ==============
NET ASSETS
Capital paid - in....................................... $ 13,389,150 $ 18,445,641 $ 40,595,700
Undistributed (distributions in
excess of) net investment income................... (104,256) (161,977) (117,245)
Accumulated net realized gain (loss) on
investments and foreign currency transactions...... 156,884 2,450,176 6,675,970
Net unrealized appreciation (depreciation) of:
Investments........................................ 2,143,330 5,210,267 25,525,567
Foreign currency................................... 0 151,116 0
-------------- -------------- --------------
TOTAL NET ASSETS................................. $ 15,585,108 $ 26,095,223 $ 72,679,992
============== ============== ==============
NET ASSET VALUE PER SHARE
(based on shares of beneficial interest
outstanding, unlimited number of shares
authorized without par value)........................... $ 15.567 $ 16.208 $ 39.434
Total shares outstanding at end of period............... 1,001,174 1,609,989 1,843,090
Cost of investment securities........................... $ 13,550,296 $ 20,893,947 $ 47,080,565
</TABLE>
See notes to financial statements.
62
<PAGE> 64
<TABLE>
<CAPTION>
MATRIX GROWTH & MULTIPLE
EQUITY INCOME STRATEGIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Investments - securities, at value...................... $ 19,041,639 $ 29,316,465 $ 36,986,412
Investments - repurchase agreements..................... 0 2,773,000 1,377,000
Foreign currency holdings, at value (cost $15,111)...... 0 0 0
Cash.................................................... 97,403 358 174
Income receivable....................................... 20,414 50,867 89,488
Receivable for securities sold.......................... 19,108 39,469 602,236
Unrealized appreciation on forward currency
contracts.......................................... 0 0 0
Receivable for trust shares sold........................ 31,457 82,530 22,926
Prepaid expenses........................................ 1,527 1,981 3,693
Foreign income tax reclaim receivable................... 0 6,005 0
Due from adviser........................................ 5,183 764 0
-------------- -------------- --------------
TOTAL ASSETS........................................ 19,216,731 32,271,439 39,081,929
LIABILITIES
Payable for securities purchased........................ 56,566 214,629 343,286
Unrealized depreciation on forward currency
contracts.......................................... 0 0 0
Advisory fee payable.................................... 10,031 17,902 21,709
Accounts payable and accrued expenses................... 50,297 52,041 45,410
Payable for trust shares redeemed....................... 28,678 7,459 201,979
-------------- -------------- --------------
TOTAL LIABILITIES................................... 145,572 292,031 612,384
-------------- -------------- --------------
TOTAL NET ASSETS.................................... $ 19,071,159 $ 31,979,408 $ 38,469,545
============== ============== ==============
NET ASSETS
Capital paid - in....................................... $ 15,108,148 $ 26,694,047 $ 25,713,263
Undistributed (distributions in
excess of) net investment income................... 34,581 102,398 112,395
Accumulated net realized gain (loss) on
investments and foreign currency transactions...... 1,252,617 1,213,535 1,646,132
Net unrealized appreciation (depreciation) of:
Investments........................................ 2,675,813 3,969,433 10,997,755
Foreign currency................................... 0 (5) 0
-------------- -------------- --------------
TOTAL NET ASSETS................................. $ 19,071,159 $ 31,979,408 $ 38,469,545
============== ============== ==============
NET ASSET VALUE PER SHARE
(based on shares of beneficial interest
outstanding, unlimited number of shares
authorized without par value)........................... $ 16.087 $ 16.304 $ 15.767
Total shares outstanding at end of period............... 1,185,528 1,961,389 2,439,928
Cost of investment securities........................... $ 16,365,826 $ 28,120,032 $ 27,365,657
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME U.S. GOVERNMENT
BOND BOND
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
ASSETS
Investments - securities, at value...................... $ 20,548,043 $ 9,150,298
Investments - repurchase agreements..................... 673,000 637,000
Foreign currency holdings, at value (cost $15,111)...... 0 0
Cash.................................................... 3,337 868
Income receivable....................................... 358,687 109,007
Receivable for securities sold.......................... 214,585 1,392
Unrealized appreciation on forward currency
contracts.......................................... 0 0
Receivable for trust shares sold........................ 60,061 0
Prepaid expenses........................................ 1,845 950
Foreign income tax reclaim receivable................... 0 0
Due from adviser........................................ 3,604 6,913
-------------- --------------
TOTAL ASSETS........................................ 21,863,162 9,906,428
LIABILITIES
Payable for securities purchased........................ 331,748 0
Unrealized depreciation on forward currency
contracts.......................................... 0 0
Advisory fee payable.................................... 12,436 4,952
Accounts payable and accrued expenses................... 45,547 40,939
Payable for trust shares redeemed....................... 6,738 107,603
-------------- --------------
TOTAL LIABILITIES................................... 396,469 153,494
-------------- --------------
TOTAL NET ASSETS.................................... $ 21,466,693 $ 9,752,934
============== ==============
NET ASSETS
Capital paid - in....................................... $ 19,998,899 $ 9,157,818
Undistributed (distributions in
excess of) net investment income................... 487,419 270,495
Accumulated net realized gain (loss) on
investments and foreign currency transactions...... (211,156) 105,891
Net unrealized appreciation (depreciation) of:
Investments........................................ 1,191,531 218,730
Foreign currency................................... 0 0
-------------- --------------
TOTAL NET ASSETS................................. $ 21,466,693 $ 9,752,934
============== ==============
NET ASSET VALUE PER SHARE
(based on shares of beneficial interest
outstanding, unlimited number of shares
authorized without par value)........................... $ 10.083 $ 10.520
Total shares outstanding at end of period............... 2,129,009 927,091
Cost of investment securities........................... $ 20,029,512 $ 9,568,568
</TABLE>
See notes to financial statements.
63
<PAGE> 65
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SMALL CAP WORLD
GROWTH EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income......................................... $ 7,506 $ 230,246 $ 161,291
Interest income......................................... 3,976 15,726 78,185
Foreign taxes withheld.................................. 0 (28,592) 0
-------------- -------------- --------------
TOTAL INCOME........................................ 11,482 217,380 239,476
EXPENSES
Investment management fee............................... 72,872 90,029 240,424
Administrative fee...................................... 14,998 21,779 56,681
Custodian fee........................................... 37,981 43,710 31,505
Audit fee and expenses.................................. 7,802 7,803 7,802
Legal fee............................................... 2,564 2,565 2,564
Printing expenses....................................... 3,091 3,092 3,092
Trustees fee and expenses............................... 4,566 4,567 4,566
Transfer agent fee...................................... 2,308 1,023 1,012
Insurance............................................... 1,908 2,915 7,015
Other................................................... 632 7,427 2,347
Expenses borne by the adviser........................... (32,136) (27,710) 0
Expense reductions...................................... (848) (2,864) (287)
-------------- -------------- --------------
TOTAL EXPENSES........................................ 115,738 154,336 356,721
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)....................... (104,256) 63,044 (117,245)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments.......................... 311,839 2,269,903 6,675,971
Net realized gain on foreign currency transactions........ 0 308,851 0
Change in unrealized appreciation (depreciation) of:
Investments............................................. (93,762) 1,354,614 2,839,969
Foreign currency........................................ 0 (121,573) 0
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN...................... 218,077 3,811,795 9,515,940
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $ 113,821 $ 3,874,839 $ 9,398,695
============== ============== ==============
</TABLE>
64
<PAGE> 66
<TABLE>
<CAPTION>
MATRIX GROWTH & MULTIPLE
EQUITY INCOME STRATEGIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income......................................... $ 118,243 $ 201,524 $ 67,461
Interest income......................................... 12,918 66,082 255,835
Foreign taxes withheld.................................. 0 (5,391) 0
-------------- -------------- --------------
TOTAL INCOME........................................ 131,161 262,215 323,296
EXPENSES
Investment management fee............................... 54,589 95,890 127,824
Administrative fee...................................... 14,687 21,578 30,368
Custodian fee........................................... 36,116 30,518 28,754
Audit fee and expenses.................................. 7,802 7,803 7,802
Legal fee............................................... 2,564 2,565 2,564
Printing expenses....................................... 3,091 3,091 3,091
Trustees fee and expenses............................... 4,566 4,567 4,566
Transfer agent fee...................................... 1,012 1,268 1,012
Insurance............................................... 1,629 1,802 3,876
Other................................................... 550 602 1,294
Expenses borne by the adviser........................... (28,682) (9,699) (124)
Expense reductions...................................... (1,344) (168) (126)
-------------- -------------- --------------
TOTAL EXPENSES........................................ 96,580 159,817 210,901
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)....................... 34,581 102,398 112,395
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments.......................... 1,273,057 1,233,918 1,649,382
Net realized gain on foreign currency transactions........ 0 0 0
Change in unrealized appreciation (depreciation) of:
Investments............................................. 1,011,265 1,620,957 2,357,156
Foreign currency........................................ 0 (5) 0
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN...................... 2,284,322 2,854,870 4,006,538
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $ 2,318,903 $ 2,957,268 $ 4,118,933
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME U.S. GOVERNMENT
BOND BOND
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
INVESTMENT INCOME
Dividend income......................................... $ 34,529 $ 0
Interest income......................................... 749,219 311,221
Foreign taxes withheld.................................. (578) 0
-------------- --------------
TOTAL INCOME........................................ 783,170 311,221
EXPENSES
Investment management fee............................... 69,426 28,848
Administrative fee...................................... 17,211 9,166
Custodian fee........................................... 36,460 23,595
Audit fee and expenses.................................. 7,802 7,802
Legal fee............................................... 2,563 2,564
Printing expenses....................................... 3,092 3,091
Trustees fee and expenses............................... 4,566 4,566
Transfer agent fee...................................... 998 1,012
Insurance............................................... 1,713 1,098
Other................................................... 567 369
Expenses borne by the adviser........................... (25,085) (41,200)
Expense reductions...................................... (297) (48)
-------------- --------------
TOTAL EXPENSES........................................ 119,016 40,863
-------------- --------------
NET INVESTMENT INCOME (LOSS)....................... 664,154 270,358
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments.......................... 242,508 111,620
Net realized gain on foreign currency transactions........ 0 0
Change in unrealized appreciation (depreciation) of:
Investments............................................. (124,496) (42,692)
Foreign currency........................................ 0 0
-------------- --------------
NET REALIZED AND UNREALIZED GAIN...................... 118,012 68,928
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $ 782,166 $ 339,286
============== ==============
</TABLE>
65
<PAGE> 67
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP GROWTH PORTFOLIO
SIX MONTHS ENDED YEAR ENDED
6/30/98 12/31/97
------- --------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss)..................................... $ (104,256) $ (178,639)
Net realized gain on investments................................. 311,839 484,519
Net realized gain on foreign currency transactions............... 0 0
Change in unrealized appreciation (depreciation) of:
Investments.................................................... (93,762) 231,867
Foreign currency............................................... 0 0
--------------- --------------
Net increase in net assets resulting from operations............. 113,821 537,747
Dividends and distributions to Shareholders from:
Net investment income............................................ 0 0
Net realized gain on investments................................. 0 (489,944)
In excess of net investment income............................... 0 0
In excess of net realized gain on investments.................... 0 (144,232)
--------------- --------------
Net decrease in net assets resulting from distributions.......... 0 (634,176)
Trust share transactions:
Shares sold..................................................... 3,456,633 11,425,373
Shares issued to shareholders in reinvestments.................. 0 634,176
Shares repurchased.............................................. (6,238,873) (7,512,702)
--------------- --------------
Net increase (decrease) in net assets resulting from
trust share transactions....................................... (2,782,240) 4,546,847
---------------- --------------
Total increase (decrease) in net assets........................ (2,668,419) 4,450,418
Net assets
Beginning of period.............................................. 18,253,527 13,803,109
--------------- --------------
END OF PERIOD (1)................................................ $ 15,585,108 $ 18,253,527
=============== ==============
(1) Including undistributed (distributions in
excess of) net investment income................................. $ (104,256) $ 0
CHANGE IN FUND SHARES:
Shares sold...................................................... 217,341 747,354
Shares issued to shareholders in reinvestments................... 0 42,547
Shares repurchased............................................... (387,937) (478,142)
--------------- --------------
Net (decrease) increase........................................ (170,596) 311,759
=============== ==============
</TABLE>
See notes to financial statements.
66
<PAGE> 68
<TABLE>
<CAPTION>
WORLD EQUITY PORTFOLIO GROWTH PORTFOLIO
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
6/30/98 12/31/97 6/30/98
------- -------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss)..................................... $ 63,044 $ 64,509 $ (117,245)
Net realized gain on investments................................. 2,269,903 2,871,387 6,675,971
Net realized gain on foreign currency transactions............... 308,851 364,843 0
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 1,354,614 (1,085,449) 2,839,969
Foreign currency............................................... (121,573) 210,514 0
-------------- -------------- --------------
Net increase in net assets resulting from operations............. 3,874,839 2,425,804 9,398,695
Dividends and distributions to Shareholders from:
Net investment income............................................ (196,492) (247,476) 0
Net realized gain on investments................................. 0 (3,143,419) (447,017)
In excess of net investment income............................... 0 (192,080) 0
In excess of net realized gain on investments.................... 0 (145,806) 0
-------------- -------------- --------------
Net decrease in net assets resulting from distributions.......... (196,492) (3,728,781) (447,017)
Trust share transactions:
Shares sold..................................................... 5,327,906 6,457,778 7,132,320
Shares issued to shareholders in reinvestments.................. 196,492 3,728,781 447,017
Shares repurchased.............................................. (7,879,073) (8,646,191) (9,123,642)
-------------- -------------- --------------
Net increase (decrease) in net assets resulting from
trust share transactions....................................... (2,354,675) 1,540,368 (1,544,305)
-------------- -------------- --------------
Total increase (decrease) in net assets........................ 1,323,672 237,391 7,407,373
Net assets
Beginning of period.............................................. 24,771,551 24,534,160 65,272,619
-------------- -------------- --------------
END OF PERIOD (1)................................................ $ 26,095,223 $ 24,771,551 $ 72,679,992
============== ============== ==============
(1) Including undistributed (distributions in
excess of) net investment income................................. $ (161,977) $ (28,529) $ (117,245)
CHANGE IN FUND SHARES:
Shares sold...................................................... 345,291 403,152 196,302
Shares issued to shareholders in reinvestments................... 12,308 266,229 12,116
Shares repurchased............................................... (506,402) (539,499) (246,260)
-------------- -------------- --------------
Net (decrease) increase........................................ (148,803) 129,882 (37,842)
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MATRIX EQUITY PORTFOLIO
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/97 6/30/98 12/31/97
-------- ------- --------
(UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss).....................................$ (154,536) $ 34,581 $ 232,683
Net realized gain on investments................................. 5,049,584 1,273,057 3,205,511
Net realized gain on foreign currency transactions............... 18 0 0
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 7,861,793 1,011,265 (602,094)
Foreign currency............................................... 0 0 0
-------------- -------------- --------------
Net increase in net assets resulting from operations............. 12,756,859 2,318,903 2,836,100
Dividends and distributions to Shareholders from:
Net investment income............................................ 0 (50,309) (232,797)
Net realized gain on investments................................. (5,388,137) (304,469) (3,143,585)
In excess of net investment income............................... 0 0 0
In excess of net realized gain on investments.................... 0 0 0
-------------- -------------- --------------
Net decrease in net assets resulting from distributions.......... (5,388,137) (354,778) (3,376,382)
Trust share transactions:
Shares sold..................................................... 12,611,360 3,037,371 1,797,770
Shares issued to shareholders in reinvestments.................. 5,388,138 354,778 3,376,382
Shares repurchased.............................................. (14,660,353) (806,320) (4,560,270)
-------------- --------------- --------------
Net increase (decrease) in net assets resulting from
trust share transactions....................................... 3,339,145 2,585,829 613,882
-------------- -------------- --------------
Total increase (decrease) in net assets........................ 10,707,867 4,549,954 73,600
Net assets
Beginning of period.............................................. 54,564,752 14,521,205 14,447,605
-------------- -------------- --------------
END OF PERIOD (1)................................................$ 65,272,619 $ 19,071,159 $ 14,521,205
============== ============== ==============
(1) Including undistributed (distributions in
excess of) net investment income.................................$ 0 $ 34,581 $ 50,309
CHANGE IN FUND SHARES:
Shares sold...................................................... 367,894 197,583 104,446
Shares issued to shareholders in reinvestments................... 158,068 22,876 237,431
Shares repurchased............................................... (426,876) (52,148) (271,817)
-------------- -------------- --------------
Net (decrease) increase........................................ 99,086 168,311 70,060
============== ============== ==============
</TABLE>
67
<PAGE> 69
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
-CONTINUED-
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO
YEAR ENDED YEAR ENDED
6/30/98 12/31/97
----------- -----------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income...................................... $ 102,398 $ 167,722
Net realized gain (loss) on investments.................... 1,233,918 1,907,739
Net realized gain on foreign currency transactions......... 0 0
Change in unrealized appreciation (depreciation) of:
Investments.............................................. 1,620,957 1,748,714
Foreign currency......................................... (5) 0
----------- -----------
Net increase in net assets resulting from operations....... 2,957,268 3,824,175
Dividends and distributions to Shareholders from:
Net investment income...................................... (763) (166,959)
Net realized gain on investments........................... (190,604) (1,588,279)
In excess of net investment income......................... 0 0
In excess of net realized gain on investments.............. 0 0
----------- -----------
Net decrease in net assets resulting from distributions.... (191,367) (1,755,238)
Trust share transactions:
Shares sold................................................ 10,198,562 9,350,713
Shares issued to shareholders in reinvestments............. 191,366 1,755,239
Shares repurchased......................................... (2,237,888) (2,413,468)
----------- -----------
Net increase (decrease) in net assets resulting from
trust share transactions................................. 8,152,040 8,692,484
----------- -----------
Total increase (decrease) in net assets.................. 10,917,941 10,761,421
Net assets
Beginning of period........................................ 21,061,467 10,300,046
----------- -----------
END OF PERIOD (1).......................................... $31,979,408 $21,061,467
=========== ===========
(1) Including undistributed (distributions in
excess of) net investment income........................... $ 102,398 $ 763
CHANGE IN FUND SHARES:
Shares sold................................................ 644,470 662,608
Shares issued to shareholders in reinvestments............. 11,837 122,683
Shares repurchased......................................... (140,721) (168,745)
----------- -----------
Net (decrease) increase.................................. 515,586 616,546
=========== ===========
</TABLE>
See notes to financial statements.
68
<PAGE> 70
<TABLE>
<CAPTION>
HIGH INCOME BOND
MULTIPLE STRATEGIES PORTFOLIO PORTFOLIO
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
6/30/98 12/31/97 6/30/98
---------------- ------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income............................................ $ 112,395 $ 235,173 $ 664,154
Net realized gain (loss) on investments.......................... 1,649,382 2,477,484 242,508
Net realized gain on foreign currency transactions...............
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 2,357,156 3,813,895 (124,496)
Foreign currency............................................... 0 0 0
----------- ------------ ------------
Net increase in net assets resulting from operations............. 4,118,933 6,526,559 782,166
Dividends and distributions to Shareholders from:
Net investment income............................................ 0 (235,173) (91,138)
Net realized gain on investments................................. (90,286) (2,650,474) 0
In excess of net investment income............................... 0 (22) 0
In excess of net realized gain on investments.................... 0 0 0
----------- ------------ ------------
Net decrease in net assets resulting from distributions.......... (90,286) (2,885,669) (91,138)
Trust share transactions:
Shares sold...................................................... 4,091,354 9,697,302 6,486,109
Shares issued to shareholders in reinvestments................... 90,286 2,885,670 91,138
Shares repurchased............................................... (4,859,429) (12,988,684) (3,717,408)
----------- ------------ ------------
Net increase (decrease) in net assets resulting from
trust share transactions....................................... (677,789) (405,712) 2,859,839
----------- ------------ ------------
Total increase (decrease) in net assets........................ 3,350,858 3,235,178 3,550,867
Net assets
Beginning of period.............................................. 35,118,687 31,883,509 17,915,826
----------- ------------ ------------
END OF PERIOD (1)................................................ $38,469,545 $ 35,118,687 $21,466,693
=========== ============ ============
(1) Including undistributed (distributions in
excess of) net investment income................................. $ 112,395 $ 0 $ 487,419
CHANGE IN FUND SHARES:
Shares sold...................................................... 280,586 655,204 647,134
Shares issued to shareholders in reinvestments................... 6,047 207,591 9,049
Shares repurchased............................................... (327,261) (892,919) (370,348)
----------- ------------ ------------
Net (decrease) increase........................................ (40,628) (30,124) 285,835
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
HIGH INCOME BOND
PORTFOLIO U.S. GOVERNMENT BOND PORTFOLIO
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
12/31/97 6/30/98 12/31/97
---------------- ---------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income............................................ $ 1,076,184 $ 270,358 $ 562,674
Net realized gain (loss) on investments.......................... (33,655) 111,620 39,088
Net realized gain on foreign currency transactions...............
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 888,853 (42,692) 238,876
Foreign currency............................................... 0 0 0
----------- ----------- -----------
Net increase in net assets resulting from operations............. 1,931,382 339,286 840,638
Dividends and distributions to Shareholders from:
Net investment income............................................ (1,167,386) (4,792) (552,823)
Net realized gain on investments................................. 0 0 (59,836)
In excess of net investment income............................... (17,411) 0 0
In excess of net realized gain on investments.................... 0 0 (19,087)
----------- ----------- -----------
Net decrease in net assets resulting from distributions.......... (1,184,797) (4,792) (631,746)
Trust share transactions:
Shares sold...................................................... 12,288,479 2,350,782 1,631,131
Shares issued to shareholders in reinvestments................... 1,184,796 4,792 631,746
Shares repurchased............................................... (9,138,545) (2,616,241) (3,526,283)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from
trust share transactions....................................... 4,334,730 (260,667) (1,263,406)
----------- ----------- -----------
Total increase (decrease) in net assets........................ 5,081,315 73,827 (1,054,514)
Net assets
Beginning of period.............................................. 12,834,511 9,679,107 10,733,621
----------- ----------- -----------
END OF PERIOD (1)................................................ $17,915,826 $ 9,752,934 $ 9,679,107
=========== =========== ===========
(1) Including undistributed (distributions in
excess of) net investment income................................. $ (85,597) $ 270,495 $ 4,929
CHANGE IN FUND SHARES:
Shares sold...................................................... 1,263,456 226,424 155,066
Shares issued to shareholders in reinvestments................... 121,580 459 62,082
Shares repurchased............................................... (941,065) (252,365) (344,656)
----------- ----------- -----------
Net (decrease) increase........................................ 443,971 (25,482) (127,508)
=========== =========== ===========
</TABLE>
69
<PAGE> 71
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------- PERIOD ENDED
(UNAUDITED) 1997 1996 DECEMBER 31, 1995 (1)
----------- ---- ---- ---------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $15.578 $16.050 $12.638 $10.000
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss.................... (0.104) (0.152) (0.091) (0.042)
Net Realized and Unrealized Gain
on Investments...................... 0.093 0.243 3.560 3.047
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS............ (0.011) 0.091 3.469 3.005
------- ------- ------- -------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.000) (0.000) (0.000) (0.000)
From Net Realized Capital Gains........ (0.000) (0.435) (0.057) (0.367)
In Excess of Net Realized Capital Gains (0.000) (0.128) (0.000) (0.000)
------- ------- ------- -------
Total Distributions.................... (0.000) (0.563) (0.057) (0.367)
------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD............ $15.567 $15.578 $16.050 $12.638
======= ======= ======= =======
TOTAL RETURN (2) (3)........................ (0.08)%(4) 0.73% 27.39% 30.08%(4)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $15,585 $ 18,254 $ 13,803 $ 3,813
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement....................... 1.72%(5) 1.79% 2.38% 9.00% (5)
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement and Expense
Reductions.......................... 1.35%(5) 1.35% 1.35% 1.35% (5)
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions ......................... 1.36%(5) 1.35% 1.35% 1.38% (5)
Ratio of Net Investment Income to
Average Net Assets ................. (1.22)%(5) (1.06)% (0.90)% (0.79)%(5)
Portfolio Turnover Rate................ 44.41%(4) 104.72% 72.66% 73.76%(4)
</TABLE>
(1) From commencement of operations May 4, 1995.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
See notes to financial statements.
70
<PAGE> 72
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.084 $ 15.062 $ 13.823 $ 11.752 $ 11.348 $ 10.177
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.040 0.068 0.016 0.014 0.013 0.086
Net Realized and Unrealized Gain
(Loss) on Investments 2.209 1.392 1.647 2.872 1.119 1.679
--------- ----------- ---------- ---------- ---------- -----------
TOTAL FROM INVESTMENT OPERATIONS 2.249 1.460 1.663 2.886 1.132 1.765
--------- ----------- ---------- ---------- ---------- -----------
LESS DISTRIBUTIONS:
From Net Investment Income (0.125) (0.161) (0.013) (0.000) (0.023) (0.091)
In Excess of Net Investment Income (0.000) (0.126) (0.051) (0.000) (0.000) (0.007)
From Net Realized Capital Gains (0.000) (2.056) (0.360) (0.815) (0.698) (0.496)
In Excess of Net Realized Capital Gains (0.000) (0.095) (0.000) (0.000) (0.007) (0.000)
--------- ----------- ---------- ---------- ---------- -----------
Total Distributions (0.125) (2.438) (0.424) (0.815) (0.728) (0.594)
--------- ----------- ---------- ---------- ---------- -----------
NET ASSET VALUE AT END OF PERIOD $ 16.208 $ 14.084 $ 15.062 $ 13.823 $ 11.752 $ 11.348
========= =========== ========== ========== ========== ===========
TOTAL RETURN (2) (3) 15.98%(4) 9.98% 12.33% 24.32% 10.02% 17.32%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 26,095 $ 24,772 $ 24,534 $ 18,191 $ 11,500 $ 12,230
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.42%(5) 1.47% 1.50% 1.67% 2.22% 1.79%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 1.20%(5) 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions (6) 1.22%(5) 1.20% 1.20% 1.20% -- --
Ratio of Net Investment Income to
Average Net Assets 0.49%(5) 0.25% 0.10% 0.12% 0.16% 0.92%
Portfolio Turnover Rate 53.82%(4) 120.50% 61.14% 97.85% 110.12% 78.50%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
(6) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
71
<PAGE> 73
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 34.702 $ 30.623 $ 25.866 $ 20.056 $ 20.390 $ 20.454
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) (0.064) (0.082) (0.063) 0.007 0.173 0.468
Net Realized and Unrealized Gain
(Loss) on Investments 5.034 7.226 6.736 7.419 (0.335) 1.401
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 4.970 7.144 6.673 7.426 (0.162) 1.869
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income (0.000) (0.000) (0.000) (0.173) (0.086) (0.436)
In Excess of Net Investment Income (0.000) (0.000) (0.002) (0.000) (0.000) (0.373)
From Net Realized Capital Gains (0.238) (3.065) (1.914) (1.443) (0.086) (1.124)
--------- --------- --------- --------- --------- ---------
Total Distributions (0.238) (3.065) (1.916) (1.616) (0.172) (1.933)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 39.434 $ 34.702 $ 30.623 $ 25.866 $ 20.056 $ 20.390
========= ========= ========= ========= ========= =========
TOTAL RETURN (2) (3) 14.37%(4) 23.62% 25.74% 37.12% (0.79)% 9.09%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 72,680 $ 65,273 $ 54,565 $ 42,919 $ 30,815 $ 42,530
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.04%(5) 1.10% 1.17% 1.17% 1.33% 1.21%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 1.04%(5) 1.10% 1.17% 1.17% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions (6) 1.04%(5) 1.10% 1.17% 1.17% -- --
Ratio of Net Investment Income to
Average Net Assets (0.34)%(5) (0.25)% (0.23)% 0.01% 0.78% 1.74%
Portfolio Turnover Rate 49.38% (4) 54.74% 67.82% 166.87% 155.12% 6.05%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
(6) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
72
<PAGE> 74
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.275 $ 15.254 $ 15.704 $ 12.372 $ 14.650 $ 13.891
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.024 0.287 0.659 0.559 0.521 0.314
Net Realized and Unrealized Gain
(Loss) on Investments 2.101 2.965 0.063 3.560 (0.651) 2.171
---------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.125 3.252 0.722 4.119 (0.130) 2.485
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From Net Investment Income (0.044) (0.291) (0.654) (0.494) (0.521) (0.296)
In Excess of Net Investment Income (0.000) (0.000) (0.000) (0.000) (0.000) (0.170)
From Net Realized Capital Gains (0.269) (3.940) (0.518) (0.293) (1.627) (1.260)
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions (0.313) (4.231) (1.172) (0.787) (2.148) (1.726)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE AT END OF PERIOD $ 16.087 $ 14.275 $ 15.254 $ 15.704 $ 12.372 $ 14.650
========== ========== ========== ========== ========== ==========
TOTAL RETURN (2) (3) 14.96%(4) 22.05% 4.62% 33.45% (1.05)% 17.87%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 19,071 $ 14,521 $ 14,448 $ 16,018 $ 12,312 $ 15,251
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.49%(5) 1.54% 1.48% 1.51% 1.60% 1.59%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 1.15%(5) 1.15% 1.15% 1.15% 1.16% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (6) 1.17%(5) 1.18% 1.15% 1.17% -- --
Ratio of Net Investment Income to
Average Net Assets 0.41%(5) 1.63% 3.74% 3.89% 3.16% 1.85%
Portfolio Turnover Rate 71.48%(4) 169.75% 19.41% 48.20% 193.40% 109.57%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
(6) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
73
<PAGE> 75
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------- PERIOD ENDED
(UNAUDITED) 1997 1996 DECEMBER 31, 1995(1)
------------- ------- ------- --------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $14.567 $12.421 $11.171 $10.000
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.052 0.127 0.070 0.045
Net Realized and Unrealized Gain
(Loss) on Investments............... 1.798 3.351 1.291 1.266
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS............ 1.850 3.478 1.361 1.311
------- ------- ------- -------
LESS DISTRIBUTIONS:
From Net Investment Income(2).......... (0.000) (0.127) (0.070) (0.045)
In Excess of Net Investment Income..... (0.000) (0.000) (0.001) (0.000)
From Net Realized Capital Gains........ (0.113) (1.205) (0.040) (0.095)
------- ------- ------- -------
Total Distributions.................... (0.113) (1.332) (0.111) (0.140)
------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD............ $16.304 $14.567 $12.421 $11.171
======= ======= ======= =======
TOTAL RETURN(3)(4).......................... 12.71%(5) 28.20% 12.15% 13.09%(5)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $31,979 $21,061 $10,300 $3,335
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement ...................... 1.33%(6) 1.60% 2.63% 7.27%(6)
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement and Expense
Reductions.......................... 1.25%(6) 1.25% 1.25% 1.25%(6)
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions ......................... 1.25%(6) 1.25% 1.26% 1.49%(6)
Ratio of Net Investment Income to
Average Net Assets ................. 0.80%(6) 1.05% 0.82% 1.17%(6)
Portfolio Turnover Rate................ 29.74%(5) 162.94% 131.85% 33.49%(5)
</TABLE>
(1) From commencement of operations May 31, 1995.
(2) For June 30, 1998, amount was less than $0.001 per share.
(3) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(4) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(5) Not annualized.
(6) Annualized.
See notes to financial statements.
74
<PAGE> 76
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.158 $ 12.699 $ 12.043 $ 10.022 $ 12.182 $ 11.785
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.046 0.103 0.143 0.137 0.236 0.424
Net Realized and Unrealized Gain
(Loss) on Investments 1.599 2.629 2.069 3.086 (0.711) 0.835
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.645 2.732 2.212 3.223 (0.475) 1.259
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income (0.000) (0.103) (0.144) (0.136) (0.235) (0.424)
In Excess of Net Investment Income (2) (0.000) (0.000) (0.000) (0.000) (0.008) (0.000)
From Net Realized Capital Gains (0.036) (1.170) (1.412) (1.066) (1.418) (0.438)
In Excess of Net Realized Capital Gains (0.000) (0.000) (0.000) (0.000) (0.024) (0.000)
--------- --------- --------- --------- --------- ---------
Total Distributions (0.036) (1.273) (1.556) (1.202) (1.685) (0.862)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 15.767 $ 14.158 $ 12.699 $ 12.043 $ 10.022 $ 12.182
========= ========= ========= ========= ========= =========
TOTAL RETURN (3) (4) 11.64%(5) 21.79% 18.29% 32.24% (3.91)% 10.52%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 38,470 $ 35,119 $ 31,884 $ 26,380 $ 21,150 $ 24,522
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.16%(6) 1.21% 1.32% 1.33% 1.48% 1.35%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 1.15%(6) 1.19% 1.20% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions (7) 1.16%(6) 1.19% 1.20% 1.20% -- --
Ratio of Net Investment Income to
Average Net Assets 0.62%(6) 0.69% 1.16% 1.14% 1.74% 3.20%
Portfolio Turnover Rate 34.67%(5) 45.87% 92.21% 161.10% 153.64% 25.57%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) For 1997, amount was less than $0.001 per share.
(3) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(4) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(5) Not annualized.
(6) Annualized.
(7) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
75
<PAGE> 77
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.720 $ 9.173 $ 8.589 $ 7.914 $ 9.704 $ 9.492
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.318 0.640 0.596 0.779 1.018 0.848
Net Realized and Unrealized Gain
(Loss) on Investments 0.088 0.598 0.624 0.717 (1.711) 0.567
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.406 1.238 1.220 1.496 (0.693) 1.415
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income (0.043) (0.681) (0.596) (0.779) (1.005) (0.849)
In Excess of Net Investment Income (0.000) (0.010) (0.040) (0.042) (0.006) (0.000)
From Net Realized Capital Gains (0.000) (0.000) (0.000) (0.000) (0.075) (0.354)
In Excess of Net Realized Capital Gains (0.000) (0.000) (0.000) (0.000) (0.011) (0.000)
--------- --------- --------- --------- --------- ---------
Total Distributions (0.043) (0.691) (0.636) (0.821) (1.097) (1.203)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 10.083 $ 9.720 $ 9.173 $ 8.589 $ 7.914 $ 9.704
========= ========= ========= ========= ========= =========
TOTAL RETURN (2) (3) 4.21%(4) 13.54% 14.20% 18.98% (7.08)% 14.91%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 21,467 $ 17,916 $ 12,835 $ 8,764 $ 7,771 $ 14,496
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.45%(5) 1.64% 1.99% 2.04% 2.03% 1.59%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 1.20%(5) 1.20% 1.18% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (6) 1.20%(5) 1.20% 1.20% 1.21% -- --
Ratio of Net Investment Income to
Average Net Assets 6.70%(5) 7.15% 7.96% 8.62% 8.70% 8.04%
Portfolio Turnover Rate 25.93%(4) 91.54% 105.48% 82.15% 200.19% 90.82%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
(6) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
76
<PAGE> 78
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 (1) 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.161 $ 9.938 $ 10.510 $ 9.718 $ 10.923 $ 10.659
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.292 0.630 0.629 0.765 0.690 0.674
Net Realized and Unrealized Gain
(Loss) on Investments 0.072 0.299 (0.385) 1.191 (0.986) 0.328
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.364 0.929 0.244 1.956 (0.296) 1.002
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income (0.005) (0.617) (0.610) (0.765) (0.690) (0.673)
In Excess of Net Investment Income (0.000) (0.000) (0.000) (0.045) (0.000) (0.000)
From Net Realized Capital Gains (0.000) (0.068) (0.206) (0.354) (0.105) (0.062)
In Excess of Net Realized Capital Gains (0.000) (0.021) (0.000) (0.000) (0.112) (0.000)
Tax Return of Capital (0.000) (0.000) (0.000) (0.000) (0.002) (0.003)
--------- --------- --------- --------- --------- ---------
Total Distributions (0.005) (0.706) (0.816) (1.164) (0.909) (0.738)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 10.520 $ 10.161 $ 9.938 $ 10.510 $ 9.718 $ 10.923
========= ========= ========= ========= ========= =========
TOTAL RETURN (2) (3) 3.59%(4) 9.37% 2.36% 20.18% (2.72)% 9.38%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 9,753 $ 9,679 $ 10,734 $ 11,618 $ 14,444 $ 20,710
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reimbursement/Waiver 1.71%(5) 1.73% 1.66% 1.59% 1.45% 1.30%
Ratio of Operating Expenses to
Average Net Assets After Expense
Reimbursement/Waiver and
Expense Reductions 0.85%(5) 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (6) 0.85%(5) 0.86% 0.85% 0.85% -- --
Ratio of Net Investment Income to
Average Net Assets 5.62%(5) 5.86% 5.80% 6.18% 5.65% 5.20%
Portfolio Turnover Rate 12.19%(4) 124.75% 244.96% 252.94% 289.71% 27.84%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne by
the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product's prospectus.
(4) Not annualized.
(5) Annualized.
(6) For fiscal years ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without expense reductions.
See notes to financial statements.
77
<PAGE> 79
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
NOTE A -- ORGANIZATION
Variable Investors Series Trust (the "Trust") was established as a
Massachusetts business trust under the laws of Massachusetts by an Agreement and
Declaration of Trust dated December 23, 1986. The Trust is an open-end, series
management investment company which currently comprises eight series of shares
of beneficial interest (the "Portfolios") each of which represents the entire
interest in a separate portfolio of investments. The Portfolios are the Small
Cap Growth Portfolio, the World Equity Portfolio, the Growth Portfolio, the
Matrix Equity Portfolio, the Growth & Income Portfolio, the Multiple Strategies
Portfolio, the High Income Bond Portfolio, and the U.S. Government Bond
Portfolio.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS: The Trust's equity securities, including
American Depositary Receipts (ADR's) and other forms of depository receipts,
traded on a national securities exchange are valued at the last sales price, or,
if no closing price is available, at a bid price estimated by a broker or
dealer. Debt securities are generally valued on the basis of valuations
furnished by pricing services which determine valuations for normal
institutional size trading units of debt securities, without exclusive reliance
upon quoted prices. These valuations are believed to reflect with greater
accuracy the fair market value of such securities. Short-term securities
maturing in 60 days or less are valued at cost plus earned discount to maturity
(amortized cost), which approximates market value. Securities in other mutual
funds are valued at the net asset value of those funds. Securities for which
current market quotations are not readily available are stated at fair value as
determined in good faith under the direction of the Trustees.
FOREIGN SECURITIES: Foreign securities traded on a recognized securities
exchange are valued at the last sales price in the principal market where they
are traded, or, if closing prices are unavailable, at the last bid price
available prior to the time a Portfolio's net asset value is determined. Foreign
portfolio security prices are furnished by quotation services expressed in the
local currency's value and are translated into U.S. dollars at the current rate
of exchange. Foreign securities for which prices cannot be obtained by the
quotation services are valued using dealer supplied quotations.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Trust's custodian takes possession of the underlying collateral
securities, the value of which at least equals the principal amount, including
interest, of the repurchase transaction. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Portfolio has the
right to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral, or proceeds may be subject to legal proceedings.
78
<PAGE> 80
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
INVESTMENT TRANSACTIONS: Investment security transactions are recorded on
the date of purchase, sale, or maturity. Dividend income is recorded on the
ex-dividend date, or, in the case of dividend income on foreign securities, on
the ex-dividend date or when the Trust becomes aware of its declaration.
Interest income is recorded on the accrual basis. Realized gains and losses from
security transactions are determined on the basis of identified cost.
FOREIGN CURRENCY TRANSLATIONS: The records of the Trust are maintained in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at a
current rate of exchange of such currency to determine the value of investments,
other assets and liabilities on the date of any determination of net asset value
of the Portfolios. Purchases and sales of securities and income and expenses are
converted at the prevailing rate of exchange on the respective dates of such
transactions. Net realized gain (loss) on foreign currency includes net realized
currency gains and losses recognized between accrual and payment dates. The
Portfolios do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
FORWARD FOREIGN CURRENCY CONTRACTS: Upon the purchase or sale of a
security denominated in foreign currency, the Trust may enter into a forward
currency exchange contract for the purchase or sale, for a fixed amount of U.S.
dollars, of an amount of the foreign currency required to settle the security
transaction in order to hedge against a change in the foreign currency exchange
rate. Accordingly, the Trust would not realize currency gains or losses between
the trade and settlement dates on such security transactions. A Portfolio may
engage in position hedging to protect against a decline in value relative to the
U.S. dollar of the currencies in which their portfolio securities are
denominated or quoted.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Trust on each day and the resulting net unrealized
appreciation (depreciation) and related net receivable (payable) amount are
determined by using foreign currency exchange rates supplied by a quotation
service.
Realized gain (loss) includes net gains or losses realized by the Trust on
contracts which have matured or which the Trust has terminated by entering into
an offsetting closing transaction.
FORWARD COMMITMENTS: To secure prices or yields deemed advantageous at a
particular time, each Portfolio of the Trust may enter into a forward commitment
in which a Portfolio agrees on trade date to either make or receive delivery
against payment for securities on a delayed delivery basis. The price and
interest rate of such securities are fixed at trade date. For forward commitment
purchases, the Portfolio does not earn interest on such security until
settlement date.
FEDERAL INCOME TAXES: Each Portfolio of the Trust is treated as a separate
entity for Federal tax purposes. Each Portfolio of the Trust has qualified and
intends to continue to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended. By so qualifying,
the Portfolios of the Trust will not be subject to Federal income taxes to the
extent that they distribute all of their taxable income, including realized
capital gains, for the fiscal year. In addition, by distributing during each
calendar year substantially all of their net investment income, capital gains
and certain other amounts, if any, the Portfolios of the Trust will not be
subject to a Federal excise tax.
As of December 31, 1997, the High Income Bond Portfolio had a realized
capital loss carryforward, for Federal income tax purposes, of $384,526
($291,888 expires on December 31, 2002, $52,592 expires on December 31, 2003,
and $40,046 expires on December 31, 2005), available to be used to offset future
realized capital gains.
EXPENSES: Expenses directly attributable to a Portfolio are charged to
that Portfolio. Expenses not directly attributable to a Portfolio are split
evenly among the affected Portfolios, allocated on the basis of relative average
net assets, or otherwise allocated among the Portfolios as the Trustees may
direct or approve.
79
<PAGE> 81
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
DIVIDENDS AND DISTRIBUTIONS: Each of the Portfolios declares and
distributes dividends from net investment income, if any, and distributes its
net realized capital gains, if any, at least annually. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
These differences are primarily due to utilization of capital loss
carryovers, differing treatments for foreign currency transactions and
differences in the timing of recognition of certain capital losses for financial
reporting and tax purposes. Both dividends and capital gain distributions are
made in shares of such Portfolios unless an election is made on behalf of an
Separate Account to receive dividends and capital gain distributions in cash.
NOTE C -- INVESTMENT ADVISORY AND OTHER RELATED PARTY AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
First Variable Advisory Services Corp. ("FVAS") is the investment adviser
to all Portfolios of the Trust under an investment advisory agreement with the
Trust dated September 22, 1994. FVAS retained the following sub-advisers at its
own cost and expense pursuant to sub-advisory agreements dated September 22,
1994: Value Line, Inc. as sub-adviser to the Growth and Multiple Strategies
Portfolios, State Street Bank and Trust Company through its investment
management division State Street Global Advisors as sub-adviser to the Matrix
Equity Portfolio, Federated Investment Counseling as sub-adviser to the High
Income Bond Portfolio and Strong Capital Management, Inc. as sub-adviser to the
U.S. Government Bond Portfolio. FVAS retained the following sub-advisers at its
own cost and expense pursuant to sub-advisory agreements dated May 1, 1995:
Pilgrim Baxter & Associates, Ltd. as sub-adviser to the Small Cap Growth
Portfolio and Warburg Pincus Asset Management, Inc. as sub-adviser to the Growth
& Income Portfolio. FVAS retained the following sub-adviser at its own cost and
expense pursuant to a sub-advisory agreement dated December 9, 1996: Keystone
Investment Management Company as sub-adviser to the World Equity Portfolio.
FVAS is a Massachusetts corporation which was incorporated on October 8,
1993 and which is registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940, as amended. FVAS
is a wholly-owned subsidiary of First Variable, which is a wholly-owned
subsidiary of Irish Life of North America, Inc. ("ILoNA"), which is a
wholly-owned subsidiary of Irish Life plc., of Dublin, Ireland.
As compensation for all services rendered, facilities provided and
expenses paid or assumed by FVAS under the advisory agreement, the Trust pays
compensation monthly to FVAS at the following annual rates based on the average
daily net assets of each Portfolio taken separately: 0.85% of average daily net
assets for the Small Cap Growth Portfolio; 0.70% of the first $200 million of
average daily net assets, 0.625% of the next $300 million of average daily net
assets, and 0.50% of average daily net assets in excess of $500 million for the
World Equity Portfolio; 0.70% of average daily net assets for the Growth and the
Multiple Strategies Portfolios; 0.65% of the first $100 million of average daily
net assets and 0.55% of average daily net assets in excess of $100 million for
the Matrix Equity Portfolio; 0.75% of average daily net assets for the Growth &
Income Portfolio; 0.70% of the first $40 million of average daily net assets,
0.65% of the next $20 million of average daily net assets, 0.55% of the next $15
million of average daily net assets, and 0.50% of average daily net assets in
excess of $75 million for the High Income Bond Portfolio; 0.60% of the first
$200 million of average daily net assets and 0.50% of average daily net assets
in excess of $200 million for the U.S. Government Bond Portfolio.
LIMITATIONS
First Variable has agreed to reduce its compensation for certain services
to the Trust (and, if necessary, bear certain expenses of each of the
Portfolios) through April 1, 1999 with respect to each of the Portfolios to the
extent that Portfolio expenses, other than FVAS's compensation, exceed the
annual rate of 0.50% of a Portfolio's average daily net assets (0.25% in the
case of the U.S. Government Bond Portfolio).
80
<PAGE> 82
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
EXPENSE REDUCTIONS
State Street Bank and Trust Company, the Trust's custodian, has agreed to
compensate the Portfolios and decrease the Trust's custodian expenses for cash
balances left uninvested in each of the Portfolios. For the six months ended
June 30, 1998, the Trust's expenses were reduced by $5,982.
TRUSTEES' COMPENSATION
Trustees' fees of $10,000 per year, plus $1,500 per meeting of the Board
of Trustees and $750 for each Audit Committee meeting attended (if held on a day
other than when a Board of Trustees meeting is held), are paid by the Trust to
each Trustee who is not an interested person of the Trust, First Variable, ILoNA
or FVAS. No remuneration is paid by the Trust to any Trustee or officer of the
Trust who is affiliated with First Variable, ILoNA or FVAS.
NOTE D -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for each Portfolio for the six months ended June 30, 1998
were as follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
---------------- ------------- ----------------- ------------
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio............... $ 7,637,963 $ 0 $ 10,311,271 $ 0
World Equity Portfolio................... 13,437,882 0 16,288,903 0
Growth Portfolio......................... 32,510,919 0 32,508,773 0
Matrix Equity Portfolio.................. 13,902,886 0 11,820,202 0
Growth & Income Portfolio................ 14,473,271 0 7,083,531 0
Multiple Strategies Portfolio............ 11,669,318 3,037,342 11,358,118 500,000
High Income Bond Portfolio............... 11,213,270 0 7,957,914 0
U.S. Government Bond Portfolio........... 588,816 884,296 905,060 196,188
</TABLE>
The identified cost for federal income tax purposes of investments owned by each
Portfolio (including earned discount on corporate short-term notes and
commercial paper) and their respective gross unrealized appreciation and
depreciation at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION (DEPRECIATION) APPRECIATION
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio............ $ 13,550,296 $ 2,883,238 $ (739,908) $ 2,143,330
World Equity Portfolio................ 20,893,947 6,003,325 (793,058) 5,210,267
Growth Portfolio...................... 47,080,565 25,859,261 (333,694) 25,525,567
Matrix Equity Portfolio............... 16,365,826 2,958,445 (282,632) 2,675,813
Growth & Income Portfolio............. 28,120,032 4,435,331 (465,898) 3,969,433
Multiple Strategies Portfolio......... 27,365,657 11,150,604 (152,849) 10,997,755
High Income Bond Portfolio............ 20,029,512 1,310,320 (118,789) 1,191,531
U.S. Government Bond Portfolio........ 9,568,568 228,172 (9,442) 218,730
</TABLE>
The aggregate cost of each Portfolio's investments was substantially the same
for book and Federal income tax purposes at June 30, 1998.
81
<PAGE> 83
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
-CONTINUED-
NOTE E -- FORWARD FOREIGN CURRENCY CONTRACT
As of June 30, 1998 the World Equity Portfolio had open 16 forward foreign
currency contracts which contractually obligate the Portfolio to deliver
currencies at a specified date, as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
CURRENCY SOLD SETTLEMENT DATE COST VALUE APPRECIATION/(DEPRECIATION)
------------- --------------- ---- ----- ---------------------------
<S> <C> <C> <C> <C> <C>
396,639 Australian Dollars 07/08/98 $ 262,000 $ 246,244 $ 15,756
6,855,172 French Francs 08/05/98 1,145,000 1,136,371 8,629
270,149 French Francs 08/05/98 44,502 44,782 (280)
1,086,706 German Marks 08/18/98 614,000 604,338 9,662
60,947 German Marks 08/18/98 33,690 33,894 (204)
175,804,200 Japanese Yen 07/28/98 1,366,000 1,276,606 89,394
135,782,250 Japanese Yen 09/03/98 985,000 991,272 (6,272)
1,001,126 Netherlands Guilder 08/18/98 502,000 493,958 8,042
41,105,610 Spanish Pesetas 09/03/98 273,000 268,662 4,338
23,663,795 Spanish Pesetas 09/03/98 153,996 154,664 (668)
8,574,830 Swedish Krona 09/03/98 1,100,000 1,077,856 22,144
106,762 Swedish Krona 09/03/98 13,383 13,420 (37)
2,016,906 Swiss Francs 08/18/98 1,376,000 1,338,363 37,637
</TABLE>
<TABLE>
<CAPTION>
CURRENCY PURCHASED
------------------
<S> <C> <C> <C> <C> <C>
162,589 Australian Dollars 09/03/98 98,797 101,007 2,210
41,108,197 Japanese Yen 07/27/98 309,834 298,508 (11,326)
134,696,003 Japanese Yen 07/27/98 1,006,170 978,098 (28,072)
-----------
$ 150,953
==========
</TABLE>
NOTE F -- YEAR 2000 ISSUE
Like other mutual funds, as well as other financial and business
organizations around the world, the Trust could be adversely affected if the
computer systems used by the Adviser, the Sub-Adviser and other service
providers, in performing their administrative functions do not properly process
and calculate date-related information and data as of and after January 1,
2000. This is commonly known as the "Year 2000 Issue." The Adviser and
Sub-Advisers are taking steps that they believe are reasonably designed to
address the Year 2000 Issue with respect to computer systems that they use and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trust.
82
<PAGE> 84
PRINCIPAL OFFICERS AND TRUSTEES OF
VARIABLE INVESTORS SERIES TRUST
----------------
PAUL G. CHENAULT, TRUSTEE
NORMAN A. FAIR, TRUSTEE
WESLEY E. HORTON, TRUSTEE
W. LAWRENCE HOWE, TRUSTEE
LAIRD E. WIGGIN, TRUSTEE
JOHN SOUKUP, PRESIDENT AND TRUSTEE
ARNOLD R. BERGMAN, SECRETARY
CHRIS HARDEN, TREASURER
----------------
INVESTMENT ADVISER
FIRST VARIABLE ADVISORY SERVICES CORP.
----------------
THE INFORMATION CONTAINED IN THIS REPORT IS INTENDED FOR GENERAL INFORMATIONAL
PURPOSES ONLY. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY CURRENT TRUST AND SEPARATE ACCOUNT
PROSPECTUSES WHICH CONTAIN IMPORTANT INFORMATION CONCERNING THE TRUST, THE
COMPANY, AND ITS CURRENT PUBLIC OFFERING OF VARIABLE ANNUITY CONTRACTS.
<PAGE> 85
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Federated
Prime Money Fund II, a portfolio of Federated Insurance Series.
The Report covers the six-month reporting period from January 1, 1998 through
June 30, 1998. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings and its
financial statements.
This high-quality money market fund keeps your ready cash pursuing daily income
while keeping your principal stable.* And, you have convenient, daily access to
your money.
To help provide a competitive daily yield, the fund invests in a diversified
portfolio of high-quality money market securities. At the end of the six-month
reporting period, the portfolio was invested in repurchase agreements (32.5%),
commercial paper (29.3%), variable rate notes (20.0%), short-term notes (9.7%),
and certificates of deposit (8.4%).
During the six-month reporting period, the fund paid a total of $0.02 per share
in dividends to shareholders while maintaining a stable $1.00 share price. On
June 30, 1998, net assets reached $78.3 million.
Thank you for choosing Federated Prime Money Fund II to put your cash to work
pursuing income every day. We'll continue to keep you up to date on your
investment, and we welcome your comments and suggestions.
Sincerely,
/s/ J. Christopher Donahue
J. Christopher Donahue
President
August 15, 1998
* Although money market funds seek to maintain a share value of $1.00, there
is no guarantee that will do so. An investment in the fund is neither
insured nor guaranteed by the U.S. government.
F-1
<PAGE> 86
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Federated Prime Money Fund II (the "Fund") invests in money market instruments
maturing in 397 days or less. The average maturity of these securities, computed
on a dollar weighted basis, is restricted to 90 days or less. Portfolio
securities must be rated in one of the two highest short-term rating categories
by one or more of the nationally recognized statistical rating organizations or
be of comparable quality to securities having such ratings. Typical security
types include, but are not limited to, commercial paper, certificates of
deposit, time deposits, variable rate instruments and repurchase agreements.
During the first half of 1998, inflation remained subdued although inflationary
pressures were building. The strength in domestic consumer spending and housing
was offset by the turbulence in many Asian economies and a domestic inventory
overhang as imports to the U.S. exceeded exports. Monetary policy remained on
hold throughout the first half of 1998 due to the continued problems in Asia,
despite strong domestic economic growth. Nevertheless, the Federal Reserve Board
(the "Fed") maintained a bias toward tightening due to strong domestic growth,
tight labor markets and rapidly rising labor costs. The dampening inflationary
effects of the emerging markets and domestic inventory adjustments could prove
to be temporary and inflationary pressures could rise.
Market interest rates should remain in a narrow trading range throughout the
second half of 1998. The 30-day commercial paper rate began 1998 at a high of
5.56% and traded as low as 5.43% on January 22, 1998. Thirty-day commercial
paper has traded around the federal funds target rate of 5.50% throughout the
first half of 1998. Ninety-day commercial paper rates have also traded within
this range as the yield curve remains extremely flat.
The target average maturity range for the Fund remained in the 35-45 day target
range for the entire period, reflecting a neutral position regarding Fed policy.
In structuring the Fund, there is continued emphasis placed on positioning
30-35% of the Fund's core assets in variable rate demand notes and accomplishing
a modest barbell structure.
During the six months ended June 30, 1998, the net assets of the Fund increased
from $59.7 to $78.3 million while the 7-day net yield decreased from 5.10% to
4.94%.* The effective average maturity of the Fund on June 30, was 44 days.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for money market funds most
closely reflect the fund's current earnings. Performance information does
not reflect the charges and expenses of a variable annuity or variable life
insurance contract.
F-2
<PAGE> 87
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------------------------------- ----------
<S> <C> <C>
SHORT-TERM NOTES -- 9.7%
- --------------------------------------------------------------------------------------------------------
BANKING -- 1.3%
- --------------------------------------------------------------------------------------------------------
$ 1,000,000 SALTS II Cayman Islands Corp., (Guaranteed by Bankers Trust International, PLC),
5.737%, 6/17/1999 $1,000,000
------------------------------------------------------------------------------------------ ==========
BROKERAGE -- 1.3%
- --------------------------------------------------------------------------------------------------------
$1,000,000 Goldman Sachs & Co., 5.500%, 7/27/1998 1,000,000
------------------------------------------------------------------------------------------ ==========
FINANCE - AUTOMOTIVE -- 0.7%
------------------------------------------------------------------------------------------
500,000 Chase Manhattan Auto Owner Trust 1988-C, Class A1, 5.588%, 7/9/1999 499,944
------------------------------------------------------------------------------------------
52,176 Ford Credit Auto Owner Trust 1987-B, Class A-l, 5.748%, 10/15/1998 52,176
------------------------------------------------------------------------------------------ ----------
Total 552,120
------------------------------------------------------------------------------------------ ==========
FINANCE - COMMERCIAL -- 3.8%
- --------------------------------------------------------------------------------------------------------
2,000,000 CIT Group Holdings, Inc., 6.125% - 6.500%, 7/13/1998 - 9/1/1998 2,000,584
------------------------------------------------------------------------------------------
1,000,000 (b) Triangle Funding Ltd., 5.656%, 11/16/1998 1,000,000
------------------------------------------------------------------------------------------ ----------
Total 3,000,584
------------------------------------------------------------------------------------------ ==========
FINANCE - EQUIPMENT-- 0.4%
- --------------------------------------------------------------------------------------------------------
274,719 Caterpillar Financial Asset Trust 1997-B, Class A-l, 5.805%, 11/25/1998 274,719
------------------------------------------------------------------------------------------ ==========
FINANCE - Retail -- 0.6%
- --------------------------------------------------------------------------------------------------------
500,000 Associates Corp. of North America, 8.800%, 8/1/1998 501,158
------------------------------------------------------------------------------------------ ==========
INSURANCE -- 1.0%
- --------------------------------------------------------------------------------------------------------
295,306 Arcadia Automobile Receivables Trust 1998-A, Class A-l, (Guaranteed by FSA),
5.628%, 3/15/1999 295,306
------------------------------------------------------------------------------------------ ----------
500,000 WFS Financial 1998-B Owner Trust, Class A-l, (Guaranteed by FSA), 5.658%, 7/20/1999 500,000
------------------------------------------------------------------------------------------ ----------
Total 795,306
------------------------------------------------------------------------------------------ ==========
RECREATION -- 0.6%
- --------------------------------------------------------------------------------------------------------
500,000 GreenTree Recreational, Equipment & Consumer Trust 1998-B, Class A-l, 5.668%, 7/15/1999 500,000
------------------------------------------------------------------------------------------ ----------
TOTAL SHORT-TERM NOTES 7,623,887
------------------------------------------------------------------------------------------ ==========
CERTIFICATE OF DEPOSIT -- 8.4%
- --------------------------------------------------------------------------------------------------------
BANKING -- 8.4%
- --------------------------------------------------------------------------------------------------------
1,000,000 Bankers Trust Co., New York, 6.000%, 9/9/1998 999,908
-----------------------------------------------------------------------------------------
3,600,000 Societe Generale, Paris, 5.610%- 5.870%, 6/6/1998 - 4/27/1999 3,599,275
-----------------------------------------------------------------------------------------
2,000,000 Svenska Handelsbanken, Stockholm, 5.755%, 4/6/1999 1,999,342
----------------------------------------------------------------------------------------- ==========
TOTAL CERTIFICATES OF DEPOSIT 6,598,525
-----------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 29.3%
- --------------------------------------------------------------------------------------------------------
BANKING -- 10.1%
- --------------------------------------------------------------------------------------------------------
3,000,000 Commonwealth Bank of Australia, Sydney, 5.490%, 11/12/1998 2,938,695
------------------------------------------------------------------------------------------
1,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de Belgique, Brussles),
5.500%, 11/9/1998 979,986
------------------------------------------------------------------------------------------
3,000,000 Gotham Funding Corp., 5.680%, 7/15/1998 2,993,373
------------------------------------------------------------------------------------------
1,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska Handelsbanken, Stockholm),
5.520%, 11/6/1998 980,373
------------------------------------------------------------------------------------------ ----------
Total 7,892,427
------------------------------------------------------------------------------------------ ==========
BROKERAGE -- 1.3%
- --------------------------------------------------------------------------------------------------------
1,000,000 Credit Suisse First Boston, Inc., 5.510%, 9/17/1998 988,062
------------------------------------------------------------------------------------------ ==========
CHEMICALS-- 1.1%
- --------------------------------------------------------------------------------------------------------
895,000 IMC Global, Inc., 5.710%, 7/22/1998 892,019
------------------------------------------------------------------------------------------ ==========
</TABLE>
F-3
<PAGE> 88
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
COMMERCIAL-PAPER -- CONTINUED
- --------------------------------------------------------------------------------------------------------
FINANCE-AUTOMOTIVE -- 2.5%
- --------------------------------------------------------------------------------------------------------
$ 2,000,000 Chrysler Financial Corp., 5.540%, 8/19/1998 $ 1,984,919
------------------------------------------------------------------------------------------ ===========
FINANCE-COMMERCIAL -- 6.4%
- --------------------------------------------------------------------------------------------------------
2,000,000 Greenwich Funding Corp., 5.520%, 9/8/1998 1,978,840
------------------------------------------------------------------------------------------
2,000,000 Sheffield Receivables Corp., 5.540%, 7/1/1998 2,000,000
------------------------------------------------------------------------------------------
1,000,000 Sheffield Receivables Corp., 5.525%, 8/25/1998 991,559
------------------------------------------------------------------------------------------ -----------
Total 4,970,399
------------------------------------------------------------------------------------------ ===========
FINANCE - EQUIPMENT -- 0.9%
- --------------------------------------------------------------------------------------------------------
700,000 Comdisco, Inc., 5.720%, 7/28/1998 696,997
------------------------------------------------------------------------------------------ ===========
FOREST PRODUCTS -- 03%
- --------------------------------------------------------------------------------------------------------
250,000 Temple-Inland, Inc., 6.150%, 7/9/1998 249,658
------------------------------------------------------------------------------------------ ===========
INDUSTRIAL PRODUCTS -- 0.9%
- --------------------------------------------------------------------------------------------------------
700,000 Praxair, Inc., 5.650%, 7/27/1998 697,144
------------------------------------------------------------------------------------------ ===========
INSURANCE - 3.8%
- --------------------------------------------------------------------------------------------------------
2,000,000 CXC, Inc., 5.480%, 7/10/1998 1,997,260
------------------------------------------------------------------------------------------
1,000,000 Marsh & McLennan Cos., Inc., 5.400%, 12/14/1998 975,100
------------------------------------------------------------------------------------------ -----------
Total 2,972,360
===========
OIL & OIL FINANCE -- 1.0%
- --------------------------------------------------------------------------------------------------------
800,000 Occidental Petroleum Corp., 5.680% - 5.700%, 7/5/1998 - 7/30/1998 798,610
------------------------------------------------------------------------------------------ ===========
RETAIL -- 1.0%
- --------------------------------------------------------------------------------------------------------
800,000 Safeway, Inc., 5.670% - 5.720%, 7/10/1998 - 9/29/1998 797,003
------------------------------------------------------------------------------------------ -----------
TOTAL COMMERCIAL PAPER 22,939,598
------------------------------------------------------------------------------------------ ===========
(a) NOTES -- VARIABLE -- 20.0%
- --------------------------------------------------------------------------------------------------------
BANKING -- 15.2%
- --------------------------------------------------------------------------------------------------------
160,000 Alabama State IDA, (Wellborn Cabinet, Inc.), Tax Revenue Bonds, (Amsouth Bank N.A.,
Birmingham LOC), 5.750%, 7/1/1998 160,000
------------------------------------------------------------------------------------------
1,000,000 Bankers Trust Co., New York, 5.770%, 7/1/1998 998,368
------------------------------------------------------------------------------------------
6,000 Capital One Funding Corp., Series 1995-A, (Bank One, Indianapolis, N.A. LOC), 5.630%,
7/2/1998 6,000
------------------------------------------------------------------------------------------
180,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas, Paris LOC),
5.770%, 7/2/1998 180,000
------------------------------------------------------------------------------------------
400,000 Edgefield County, SC, Series 1997 (Bondex Inc Project), (Marine Midland Bank N.A.,
Buffalo, NY LOC), 5.687%, 7/2/1998 400,000
------------------------------------------------------------------------------------------
185,000 Franklin County, OH, Edison Wielding, Series 1995, (Huntington National Bank, Columbus,
OH LOC), 5.780%, 7/2/1998 185,000
------------------------------------------------------------------------------------------
1,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, {Star Bank, NA, Cincinnati LOC),
5.710%, 7/2/1998 1,000,000
------------------------------------------------------------------------------------------
400,000 La-Man Corp., (SouthTrust Bank of Alabama, Birmingham LOC), 5.740%, 7/3/1998 400,000
------------------------------------------------------------------------------------------
1,725,012 (b) Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.656%, 7/15/1998 1,725,012
------------------------------------------------------------------------------------------
1,000,000 Long Lane Master Trust III, Series 1997-C, 5.749%, 8/3/1998 1,000,000
------------------------------------------------------------------------------------------
700,000 Lynn Haven, FL, Merrick Industries Inc. Project, Taxable Revenue Bond (Series 1998-B),
(Bank One, Ohio, N.A. LOC), 5.860%, 7/2/1998 700,000
------------------------------------------------------------------------------------------
565,000 Madison, WI Community Development Authority, Series 1997-B Hamilton Point Apts.,
(Bank One, Wisconsin, N.A. LOC), 5.760%, 7/2/1998 565,000
------------------------------------------------------------------------------------------
238,000 Maryland State IDFA, Human Genome, Series 1994, (First National Bank of Maryland,
Baltimore LOC), 5.640%, 7/6/1998 238,000
------------------------------------------------------------------------------------------
275,000 Mississippi Business Finance Corp., Metalloy Project, (Comerica Bank, Detroit, MI LOC),
5.560%, 7/2/1998 275,000
------------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE> 89
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
(a) NOTES - VARIABLE -- CONTINUED
- -------------------------------------------------------------------------------------------------------------
BANKING -- CONTINUED
- -------------------------------------------------------------------------------------------------------------
$ 1,000,000 Portage, IN, American Iron Oxide Co. Project (Series 1998-B), (Bank of Tokyo-Mitsubishi Ltd.
LOC), 5.925%, 7/2/1998 $ 1,000,000
----------------------------------------------------------------------------------------------
645,468 (b) Rabobank Optional Redemption Trust, Series 1997-101, 5.687%, 7/15/1998 645,468
----------------------------------------------------------------------------------------------
370,000 Roby Company Ltd. Partnership, (Huntington National Bank, Columbus, OH LOC),
5.660%, 7/2/1998 370,000
----------------------------------------------------------------------------------------------
135,000 Southeast Regional Holdings, LLC, Series 1995-A, (Columbus Bank and Trust Co., GA LOC),
5.890%, 7/2/1998 135,000
----------------------------------------------------------------------------------------------
1,750,000 Trap Rock Industries, Inc., Series 1997, (Corestates Bank N.A., Philadelphia, PA LOC),
5.750%, 7/1/1998 1,750,000
----------------------------------------------------------------------------------------------
191,000 Vista Funding Corp., Series 1994-A, (Fifth Third Bank of Northwestern OH LOC),
5.660%, 7/2/1998 191,000
---------------------------------------------------------------------------------------------- -----------
TOTAL 11,924,848
===========
INSURANCE -- 4.8%
- -------------------------------------------------------------------------------------------------------------
1,000,000 General American Life Insurance Co., 5.860%, 7/21/1998 1,000,000
----------------------------------------------------------------------------------------------
1,000,000 Jackson National Life Insurance Co., 5.758%, 7/25/1998 1,000,000
----------------------------------------------------------------------------------------------
710,975 (b) Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes, (Guaranteed by AMBAC),
5.658%, 9/28/1998 710,975
----------------------------------------------------------------------------------------------
1,000,000 Travelers Insurance Company, 5.665%, 7/1/1998 1,000,000
---------------------------------------------------------------------------------------------- -----------
Total 3,710,975
---------------------------------------------------------------------------------------------- -----------
TOTAL NOTES - VARIABLE 15,635,823
---------------------------------------------------------------------------------------------- ===========
(c) REPURCHASE AGREEMENTS -- 32.5%
4,000,000 Fuji Government Securities, Inc., 5.880%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
4,000,000 Goldman Sachs Group, LP, 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
4,000,000 Morgan Stanley Group, Inc., 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
4,000,000 PaineWebber Group, Inc., 5.870%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
4,000,000 Salomon Brothers, Inc., 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
4,000,000 Societe Generale Securities Corp., 6.000%, dated 6/30/1998, due 7/1/1998 4,000,000
----------------------------------------------------------------------------------------------
1,400,000 UBS Securities, Inc., 6.050%, dated 6/30/1998, due 7/1/1998 1,400,000
---------------------------------------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 25,400,000
---------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(d) $ 78,197,833
---------------------------------------------------------------------------------------------- ============
</TABLE>
(a) Floating rate note with current rate and next reset date shown.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1998, these securities amounted
to $4,081,455 which represents 5.2% of net assets.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($78,267,173) at June 30, 1998.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
FSA -- Federal Security Assurance
IDA -- Industrial Development Authority
IDFA -- Industrial Development Finance Authority
LLC -- Limited Liability Corporation
LOC -- Letter of Credit
LP -- Limited Partnership
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
F-5
<PAGE> 90
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
JUNE 30,1998 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
- ---------------------------------------------------------------------
<S> <C> <C>
Investments in repurchase agreements $25,400,000
- ---------------------------------------------------------------------
Investments in securities 52,797,833
- --------------------------------------------------------------------- -----------
Total investments in securities, at amortized cost and value $78,197,833
- -----------------------------------------------------------------------------------
Cash 35,089
- -----------------------------------------------------------------------------------
Income receivable 379,367
- -----------------------------------------------------------------------------------
Prepaid expenses 3,641
- ----------------------------------------------------------------------------------- -----------
Total assets 78,615,930
- -----------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Income distribution payable 326,580
- ---------------------------------------------------------------------
Accrued expenses 22,177
- --------------------------------------------------------------------- -----------
Total liabilities 348,757
- ----------------------------------------------------------------------------------- -----------
NET ASSETS for 78,267,173 shares outstanding $78,267,173
- ----------------------------------------------------------------------------------- ===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------
$78,267,173 / 78,267,173 shares outstanding $ 1.00
- ----------------------------------------------------------------------------------- ===========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-6
<PAGE> 91
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------
<S> <C> <C>
Interest $ 2,057,370
- -----------------------------------------------------------------------------
EXPENSES:
Investment advisory fee $ 180,118
- ----------------------------------------------------------------
Administrative personnel and services fee 61,987
- ----------------------------------------------------------------
Custodian fees 4,701
- ----------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 8,688
- ----------------------------------------------------------------
Directors'/Trustees' fees 1,267
- ----------------------------------------------------------------
Auditing fees 6,516
- ----------------------------------------------------------------
Legal fees 2,534
- ----------------------------------------------------------------
Portfolio accounting fees 17,374
- ----------------------------------------------------------------
Share registration costs 2,534
- ----------------------------------------------------------------
Printing and postage 25,702
- ----------------------------------------------------------------
Insurance premiums 2,258
- ----------------------------------------------------------------
Miscellaneous 3,802
- ---------------------------------------------------------------- ----------
Total expenses 317,481
- ----------------------------------------------------------------
Waivers --
- ----------------------------------------------------------------
Waiver of investment advisory fee (27,707)
- ---------------------------------------------------------------- ----------
Net expenses 289,774
- ----------------------------------------------------------------------------- ----------
Net investment income $1,767,596
- ----------------------------------------------------------------------------- ==========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-7
<PAGE> 92
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
- -----------------------------------------------------------------------------------------
Operations--
- -----------------------------------------------------------------------------------------
Net investment income $ 1,767,596 $ 2,970,896
- ----------------------------------------------------------------------------------------- ------------- -------------
Distributions to Shareholders--
- -----------------------------------------------------------------------------------------
Distributions from net investment income (1,767,596) (2,970,896)
- ----------------------------------------------------------------------------------------- ------------- -------------
Share Transactions--
- -----------------------------------------------------------------------------------------
Proceeds from sale of shares 146,696,237 247,591,033
- -----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 1,442,263 2,968,806
- -----------------------------------------------------------------------------------------
Cost of shares redeemed (129,530,670) (236,555,828)
- ----------------------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 18,607,830 14,004,011
- ----------------------------------------------------------------------------------------- ------------- -------------
Change in net assets 18,607,830 14,004,011
- -----------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------
Beginning of period 59,659,343 45,655,332
- ----------------------------------------------------------------------------------------- ------------- -------------
End of period $ 78,267,173 $ 59,659,343
- ----------------------------------------------------------------------------------------- ============= =============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-8
<PAGE> 93
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------
1998 1997 1996 1995 1994(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------
Income from investment operations
- -------------------------------------------------------
Net investment income 0.02 0.05 0.05 0.05 0.01
- -------------------------------------------------------
Less distributions
- -------------------------------------------------------
Distributions from net investment income (0.02) (0.05) (0.05) (0.05) (0.01)
- ------------------------------------------------------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------- ======= ======= ======= ======= ======
Total return (b) 2.46% 4.93% 4.75% 5.20% 0.50%
- -------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------
Expenses 0.80%* 0.80% 0.80% 0.80% 0.80%*
- -------------------------------------------------------
Net investment income 4.91%* 4.84% 4.68% 5.12% 4.26%*
- -------------------------------------------------------
Expense waiver (c) 0.08%* 0.20% 0.57% 2.69% 71.84%*
- -------------------------------------------------------
Supplemental data
- -------------------------------------------------------
Net assets, end of period (000 omitted) $78,267 $59,659 $45,655 $17,838 $ 552
- -------------------------------------------------------
</TABLE>
* Computed on an annualized
(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993 (start of business) to November 17, 1994, the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
F-9
<PAGE> 94
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FEDERATED PRIME MONEY FUND II
JUNE 30, 1998 (UNAUDITED)
ORGANIZATION
Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to provide current income
consistent with stability of principal and liquidity.
SIGNIFICANT ACCOUNTING POLICIES.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule 2a-7
under the Act.
Additional information on the restricted securities held at June 30, 1998 are as
follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
- ---------------------------------------------------- ----------- -----------
Liquid Asset Backed Securities Trust, Series 1997-1 2/19/1997 $1,679,114
Liquid Asset Backed Securities Trust, Series 1997-3 6/27/1997 670,645
Rabobank Optional Redemption Trust, Series 1997-101 4/17/1997 608,093
Triangle Funding Ltd. 11/4/1997 1,000,000
F-10
<PAGE> 95
FEDERATED PRIME MONEY FUND II
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (with-out par value). At June
30, 1998, capital paid-in aggregated $78,267,173.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Shares sold 146,696,237 247,591,033
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 1,442,263 2,968,806
- ----------------------------------------------------------------------
Shares redeemed (129,530,670) (236,555,828)
- ---------------------------------------------------------------------- -----------------------------
Net change resulting from share transactions 18,607,830 14,004,011
- ---------------------------------------------------------------------- =============================
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES
Organizational expenses of $22,431 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five-year period following the Fund's effective
date. For the period ended June 30, 1998, the Fund was fully amortized.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
F-11
<PAGE> 96
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John E Donahue John F. Donahue
Chairman
Thomas G. Bigley
J. Christopher Donahue
John T. Conroy, Jr. President
Nicholas P. Constantakis Edward C. Gonzales
Executive Vice President
William J. Copeland
John W. McGonigle
J. Christopher Donahue Executive Vice President, Treasurer,
and Secretary
James E. Dowd, Esq.
Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr., Esq. Matthew S. Hardin
Assistant Secretary
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
Variable funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in variable funds involves investment risk,
including the possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
F-12
<PAGE> 97
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
F-13
<PAGE> 98
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
F-14
<PAGE> 99
[LOGO:FEDERATED INVESTORS]
FEDERATED
PRIME MONEY
FUND II
Federated Insurance Series
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
--------------------------
WWW.FEDERATEDINVESTORS.COM
--------------------------
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1998
- --------------------------------------------------------------------------------
Cusip 313916504
G00433-05 (8/98)
<PAGE> 100
Tax Advantage Product Choices First Variable
Life Insurance
Company
[LOGO]
Products
VARIABLE UNIVERSAL LIFE
CAPITAL SOLUTIONS VUL
With the potential to...
BUILD WEALTH with tax-deferred growth.
ENJOY INCOME with tax-advantages through loans and withdrawals.
PRESERVE ASSETS with a death benefit that can pass free of income tax
to heirs.*
SINGLE PREMIUM VARIABLE LIFE
CAPITAL ONE PAY VL
With the potential to...
BUILD WEALTH with tax-deferred growth.
ENJOY INCOME through loans and withdrawals after age 59-1/2.**
PRESERVE ASSETS with a death benefit that can pass income tax free to heirs.*
VARIABLE ANNUITIES
CAPITAL SIX VA
CAPITAL FIVE VA
CAPITAL NO LOAD VA
With the potential to...
BUILD WEALTH with tax-deferred growth.
ENJOY INCOME with tax-advantaged access through withdrawals and
annuitization.**
PRESERVE ASSETS with a death benefit that guarantees heirs receive at
least the original investment regardless of market performance.*
* May be subject to estate taxation
** Earnings are subject to income tax when withdrawn or paid as a
death benefit. Distributions before age 59-1/2 may also be subject to 10%
penalty.
All products not yet available in all states.
tax advantaged product choices
Special Programs
ASSET ALLOCATION STRATEGIES
Asset Allocation is dividing your portfolio among several different investment
categories, such as stocks, bonds and money market instruments. Asset allocation
theory helps you and your investment professional design a portfolio that meets
your tolerance for risk. It can also help you gain the most potential return for
a certain risk level. First Variable Life offers a menu of asset allocation
models that can help you build, enjoy and preserve your wealth.
AUTOMATIC ASSET REBALANCING
Once you and your investment professional have selected a mix of investments,
automatic asset rebalancing helps you maintain it by rebalancing your portfolio.
Choose from quarterly, semi-annual or annual rebalancing. Your quarterly
statement will show activities to make tracking your investment easier.
DOLLAR COST AVERAGING
You can take advantage of a time-tested investment technique of dollar cost
averaging within your First Variable product. This strategy invests equal
amounts at regular intervals over time to take advantage of the natural ups and
downs of the financial markets. The key to dollar cost averaging is staying with
your plan, regardless of market performance. At First Variable, you can use
dollar cost averaging to move from one investment choice to another.
Dollar cost averaging does not assure a profit or protect against loss in
declining markets. Since prices fluctuate, consider your ability to continue
purchases through both high and low price levels.
<PAGE> 101
Securities distributed through First Variable Capital --------------------
Services, Inc., member NASD. Bulk Rate
2122 York Road, Suite 300 U.S. Postage
Oak Brook, IL 60523-1930 PAID
800.499.0713 Permit No. 7
www.firstvariable.com Ashland, MA
--------------------
First Variable Life Insurance
A History of Innovation
Founded in 1968, First Variable Life Insurance Company is an innovative
financial services company and the first to offer variable life insurance in the
United States. In 1994, First Variable Life was purchased by Irish Life of North
America, Inc., the U.S. subsidiary of a highly regarded, global financial
services company, Irish Life plc.
Headquartered in Dublin, Ireland, Irish Life is a major
international financial institution with assets in excess of [GRAPHIC]
$14 billion, specializing in life insurance, pension plans
and investment management. Irish Life's other U.S.
companies include:
* Interstate Assurance Company
* Guarantee Reserve Life Insurance Company
* Tri-Merica Securities Corporation
* Financial Registry of America
* IAC Advisors
First Variable Life Insurance Company brings an innovative approach to managing
wealth. We strive to help investors build, enjoy and preserve financial assets
for many generations to come.
Neither First Variable Life Insurance Company nor its agents give legal,
accounting or tax advice. Consult an attorney or tax advisor about the
consequences of financial decisions. All products not yet available in all
states.
6009 (6/98)
